Page 98 - Albanian law on entrepreuners and companies - text with with commentary

avoid this situation by adopting the above-mentioned radical change to its LLC rules. This is a
significant attraction for foreign investment.

4. So in theory, the minimum capital requirement for LLCs could have been dropped
totally as there is no legal obligation in this respect in European Law. However, there are
practical reasons to require at least a small minimum legal capital amount: rights deriving
from shares, like voting rights, etc. can with greater ease and clarity be attributed to a member
if defined as part of a nominal capital. In fact, some EU Member States are now trying to keep
these advantages, on the one hand, and to allow for higher flexibility on the other by radically
lowering the required capital amount. UK Law now allows for LLCs to be founded with 1
Pound; so does French Law (1 Euro). That means actually that it is up to the founders to
decide which amount they want to contribute in order to meet the initial requirements of their
business and to launch a signal of ‘seriousness’ to the market; and it is then up to third parties,
(especially creditors) to decide if the company appears to be sufficiently financially equipped.

5. However, as capital maintenance lose any efficiency if the minimum amount is reduced
to 100 Lekë, management’s decision to distribute payments to members must undergo an
additional ‘solvency test’ in order to be legally acceptable. The managers will be liable to the
company for the accuracy of the solvency test and must sign a ‘solvency certificate’
confirming that, after payment of the dividends, the company’s assets will still fully cover its
liabilities, and the company will have sufficient liquid assets to make payments of its
liabilities as they fall due in the next twelve months. The introduction of such a ‘solvency test’
is a safeguard method for companies without minimum capital. It was recommended by the
High Level Group of Company Law Experts as an alternative to minimum capital
requirements. 108 The Company Law provides for this concept in Articles 77 to 79.

6. Such a solvency test and the corresponding liability of the LLC management would
quite certainly prevent distribution of dividends in case of ‘undercapitalization’. So what does
‘undercapitalization’ still mean in the LLC context? As we said before (Comments to Article
16), undercapitalization may lead to ‘piercing the corporate veil’ and make LLC managers (or
dominant majority members) personally liable but only in the case of serious fraud. A LLC
which can be founded with 100 Lekë is not automatically undercapitalized. Sufficient capital
must be available when the company actually commences its operations. The General
Meeting must decide what is to happen in case of any insolvency threat, Article 82 (3). The
fact of undercapitalization must always refer to the specific capital maintenance context of the
company form in question and to the respective behaviour of members, shareholder and
(Managing) Directors. With respect to the low basic capital amount and the solvency test in
LLCs, only fraudulent intentions of founders or members could actually fulfil the piercing-
the-veil rule of Article 16 here. In other words, the (presumed) knowledge regarding the
impossibility of meeting creditors’ claims required by this provision can transform into
intentional or fraudulent wrongful trading, Article 98 (4): a Managing Director who continues

108 See above Chapter B.I.
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