Business Entities

What is the basic legal framework for Commercial Companies in Albania?

The main legislative source of corporate governance in Albania is Law No. 9901, dated 14.04.2008, “On the Entrepreneurs and Commercial Companies”, as amended (the “Company Law”). The current Albanian law on commercial companies was adopted in 2008 and brought profound changes to the previous legislation, ( i.e. Law No. 7638).

Which is the key piece of legislation governing Albanian joint stock companies?

An Albanian joint-stock company is regulated by Law No. 9901, dated 14.04.2008 “On entrepreneurs and commercial companies”, as amended (hereinafter “Company Law”).

What is the liability of the shareholders of a joint-stock company?

A joint stock company is liable for its debts and obligations towards third parties with all its assets. Shareholders are not liable towards commitments of their company but based on the principle of limited liability enshrined by Company Law, shareholders shall bear company’s losses to the extent of their unpaid subscribed shares. In company’s insolvency, although contributions are paid in full, shareholders suffer the economic risk of losing their investment pro rata with the share capital their contribution represent and not beyond that. However, the corporate veil is pierced in case of shareholder’s abusive behavior which exposes personally a shareholder with all his assets against the losses caused to the company thereby. According to Article 16 of Company Law, shareholder’s abusive behavior is deemed: (i) abusing the company form for illegal purposes, (ii) treating company’s assets as if they were shareholder’s own assets, and (iii) once knowing or must have known of the company’s insolvency, failing to take the necessary steps to ensure that the company, depending on the type of business, has sufficient capital to meet its commitments against third parties.

Which is the current Commercial Law governing business organizations in Albania?

The Law no 9901 “On Entrepreneurs and Commercial Companies”, which entered into force on 21/05/2008, is based on commercial legislation implemented in Germany, Italy and Great Britain. This Law regulates the status of entrepreneurs, the founding and managing of companies, the rights and obligations of founders, partners, members, and shareholders, companies’ reorganization and liquidation.The Commercial Law constitutes the main body of legislation for business organizations aiming to make the Albanian legislation consistent with the legislation of other European countries and the “acquis communautaire”.

What is the relationship between Cyprus and Albania?

The rapid economic development of Albania has brought the country closer to the European Union business market. By realizing the potential benefits that may gain by enhancing the relationship between every member state, Albania is becoming the next prospective EU partner. Cyprus may become one of the most important business partners of Albania in the EU. Cyprus corporate legal regime, more specifically the Cyprus Holding Companies, may assist the Albanian investors on investing in all the countries of the EU including the Arabic countries. In addition, the development of the Energy sector in Cyprus has brought many investors from around the world on developing their businesses through Cypriot Companies. The relationship between Cyprus and Albania has been growing and developing for decades now on a political, social and economical level. One of the most important aspects of this relationship is the promotion of the investment sector where both countries have agreed to co-operate on easing and protecting the path of mutual investment. On the 6th of August 2010 Cyprus and Albania have signed the “Agreement on the Promotion of Mutual Protection of Investments between the Republic of Cyprus and the Republic of Albania.” As a result, this opened a new chapter between the two countries.

Introduction

Corporate governance as developed by the Albanian commercial legislation through the relevant provisions deals with particular matters related to control, supervising, managing and compliance. However this concept is not specifically defined by the law, but particularly through doctrine and court practice. Albanian commercial legislation introduced the modern and mixed approach of corporate governance allowing the implementation of both Anglo-Saxon and German model of corporate governance. The model followed by each business entity is further defined by the existing relationship between external and internal stakeholders and Managing Body of the business entity. This relationship is subject of rules of corporate governance set by the law and those elaborated internally as a code of ethics or manual of operation by each business entity.