Latvijas Kuģniecība                                            23.03.2005. 



About legal opinion on the situation in the JSC “Latvijas Kuģniecība”



(Riga Stock Exchange note: information source- Management Board according to 

the Company Register of  the Republic of Latvia)



Regarding the legal opinion on the situation in the JSC Latvijas Kuģniecība 

(Latvian Shipping Company) prepared by A.Grutups Sworn Attorneys Bureau 

(A.Grutups SAB) on 17th of March 2005



On 17th of March, 2005 Riga Stock Exchange and mass media issued an information 

on the situation in the JSC Latvian Shipping Company (LSC) which was prepared 

by the Board not registered in Commercial register of Republic of Latvia and 

which was based on opinion by A. Grutups SAB.



According to A. Grutups SAB opinion the resolution of the extraordinary general 

meeting of Shareholders (EGM) which took place on the 11th February, 2005, 

including resolution on election new Supervisory Board, is in force and binding 

for the LSC, officials and employees of the LSC from the 11th February, 2005. 

The resolution by the new Council on the election of the new Board of Directors 

is in force and binding for the LSC, officials and employees of the LSC from 

the 14th February, 2005.



A. Grutups SAB admits that only a court may declare a decision taken by a meeting 

of stockholders as void. 



But what A. Grutups SAB fails to mention is the fact that the court ruling is 

still in force prohibiting to register any changes in the composition of LSC 

Supervisory Council and Board of Directors with the Register of Enterprises of 

the Republic of Latvia as per resolution of LSC Extraordinary General Meeting 

of shareholders of 11 February 2005, or to register any other decisions adopted 

by the Council elected by LSC EGM of shareholders of 11 February 2005, as well 

as it shall be prohibited to register any resolutions passed by the Board of 

Directors elected by the Council elected by LSC EGM of shareholders of 

11 February 2005.



A.Grutups SAB maintains that the EGM which took place on 11th of February, 2005 

was entitled to take decisions because it was convened as per the Commercial 

law of Latvia and because more than fifty percent of shareholders participated 

in the meeting. At the same time A. Grutups SAB again fails to mention that the 

organisers of the meeting which took place on 11th of February, 2005 violated:



* Article 273 of the Commercial Law because the meeting which were scheduled 

  and convened as per that clause was cancelled by the LSC Board decision on 

  9th of February, 2005.



* Clause 1.5 of the Regulations of the Central depositary of Latvia Nr. 7 “On 

  ascertaining the owners of the financial securities” according to which the 

  shareholder willing to take part in shareholders meeting should block his 

  shares before the meeting.



* Parts three and four of Article 278 according to which only those persons 

  included in the shareholders list approved by the Board can acquire the voting 

  rights at the shareholders meeting. The LSC Board did not approve such a list 

  because the meeting was cancelled!



* Item 5.3.2 of the Articles of Incorporation of the LSC and the Item 9.13 of 

  the Rules of Privatisation of the LSC according to which 8% of shares belonging 

  to one shareholder or group of shareholders gives one place in the Council. 

  Therefore, the group of shareholders representing 50.93% of the share capital of 

  LSC can only have 6 places on the Council (50.93% : 8% = 6.37). 10 places on the 

  Council are provided by not less than 80% of the shares!



Therefore, the opinion by the lawyers of the LSC Board is as follows:

* The voting procedures were severely violated at the meeting which took place on 

  11th of February, 2005.  



* The decision on election of the new Council is violating the Articles of LSC.



According to the Article 286 of the Commercial Law above mentioned violations constitute 

sufficient grounds for the Court to declare the decisions by the meeting which took 

place on 11th  of March, 2005 null and void.



Members of the Board,	

Valērijs Godunovs

Aivars Enkuzens 

Aivars Akmens