APPROVED
at the Management Board meeting of
the Joint Stock Company Latvian Shipping Company
on January 30, 2013
Consent granted
at the Supervisory Council meeting of
the Joint Stock Company Latvian Shipping Company
on February 26, 2013
JOINT STOCK COMPANY
LATVIAN SHIPPING COMPANY
SUPERVISORY COUNCIL REGULATIONS
Riga, 2013
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EXPLANATION OF TERMS IN THE REGULATIONS
Company – in these regulations, the word “Company” refers to the Joint Stock Company LATVIAN
SHIPPING COMPANY.
Shareholder – an individual or a legal entity that owns shares in the Joint Stock Company
LATVIAN SHIPPING COMPANY.
Shareholders’ Meeting – the highest governing body of the Joint Stock Company LATVIAN
SHIPPING COMPANY.
Management Board – executive body of Joint Stock Company LATVIAN SHIPPING COMPANY
which manages and acts on behalf of the Company.
Articles of Association – the Articles of Association of the Joint Stock Company LATVIAN
SHIPPING COMPANY.
Laws – the laws and regulations effective in the Republic of Latvia.
CHAPTER I
GENERAL TERMS
1.1. The Supervisory Council Regulations (hereinafter: the Regulations) of the Joint Stock
Company LATVIAN SHIPPING COMPANY define the general basis of operations, rights,
obligations, responsibilities and working procedure of the Supervisory Council.
1.2. The scope of authority of the Supervisory Council, the Chairman of the Supervisory Council,
the Deputy Chairman of the Supervisory Council and a member of the Supervisory Council is
defined by the Regulations, the Articles of Association, and the Laws.
1.3. The Supervisory Council represents shareholder interests between Shareholders’ Meetings and
controls the functions of the Management Board according to the Laws and the Articles of
Association.
1.4. The Supervisory Council ensures that the Company’s business is run according to the Laws, the
Articles of Association and the resolutions of the Shareholders’ Meeting.
CHAPTER II
COMPOSITION OF THE SUPERVISORY COUNCIL
2.1. The Supervisory Council is comprised of twelve Supervisory Council members, who are
elected by the Shareholders’ Meeting.
2.2. The Supervisory Council is elected for a term of three years. Members of the Supervisory
Council are elected to their office for the duration of the Supervisory Council’s authority.
Supervisory Council members may notify the Company of leaving their position at any time. When
leaving their position, Supervisory Council members must observe the procedure regarding leaving
their position as established by the Laws.
2.3.
Only legally capable individuals (physical persons) may be elected to the Supervisory
Council.
The following may not act as members of the Supervisory Council:
(a) a member of the Company’s Management Board, auditory, proxy or commercial
attorney;
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(b) a member of the Management Board of a subsidiary company of the Company or a
person authorised to act on behalf of the subsidiary company.
2.4. A shareholder or a group of shareholders have the right to nominate their candidates for
election to the Supervisory Council. They may nominate only as many candidates so as to the
voting-eligible share capital represented by the said shareholder or shareholder group, divided by
the number of candidates put forth, would yield not less than 5% (five per cent) of the votingeligible equity capital represented at the Shareholders’ Meeting for each candidate. The
Shareholders’ Meeting shall place each candidate for the Supervisory Council thus nominated on
an election list. When voting on the Supervisory Council members, each shareholder with voting
rights has the right to cast all of his or her votes for one or more candidates included in the list in
any proportion, in whole numbers. One vote is simultaneously held for all candidates to the
Supervisory Council included on the list.
2.5. A member of the Supervisory Council may not delegate the execution of his or her duties to
another person. Should a member of the Supervisory Council fail to participate at a meeting of the
Supervisory Council, he or she may transfer his or her vote in writing to another member of the
Supervisory Council.
2.6. The operations of the Supervisory Council are directed by the Chairman of the Supervisory
Council. During an absence of the Chairman of the Supervisory Council (due to illness, leave,
business trips, etc.), the Deputy Chairman of the Supervisory Council directs the said operations on
the Chairman’s behalf.
2.7. Supervisory Council members shall elect a Chairman and at least one Deputy Chairman from
their midst.
2.8. The Chairman and the Deputy Chairman of the Supervisory Council may at any time
announce the leaving of their position. When leaving their position, the Chairman and the Deputy
Chairman of the Supervisory Council must observe the leaving procedure as established by the
Laws.
2.9. Members of the Supervisory Council may be recalled from their position at any time by a
resolution of the Shareholders’ Meeting.
2.10. Should any member of the Supervisory Council leave his or her position or be recalled from
his or her position before the expiration of the term of authority of the Supervisory Council, a new
Supervisory Council election is held in which the entire membership of the Supervisory Council is
re-elected.
Upon leaving his or her position a member of the Supervisory Council must notify the Chairman of
the Supervisory Council of this fact in writing.
2.11. Should the Chairman of the Supervisory Council wish to leave the position of the Chairman
(while maintaining membership on the Supervisory Council) prior to the expiration of the term of
authority, he or she must notify in writing each member of the Supervisory Council and convene a
meeting of the Supervisory Council, the agenda of which must provide for the consideration of the
issue of the election of a new Chairman of the Supervisory Council. The Chairman continues to fulfil
his or her duties until such time as a new Chairman of the Supervisory Council is elected, but not
longer than 1 (one) month from the day of the notice of leaving.
2.12. Should the Deputy Chairman of the Supervisory Council wish to leave the position of Deputy
Chairman (while maintaining membership on the Supervisory Council) prior to the expiration of the
term of authority, he or she must notify the Chairman of the Supervisory Council of this fact in
writing. A Deputy Chairman of the Supervisory Council who is leaving his or her position continues
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to fulfil his or her duties until such time as a new Deputy Chairman is elected, but not longer than 1
(one) month from the day of submitting the notice of leaving.
2.13. Supervisory Council members may at any time remove the Chairman or the Deputy Chairman
from his or her post prior to the expiration of their term of authority.
2.14. A resolution of the Shareholders’ Meeting regarding the election or recall of members of the
Supervisory Council enters into force at the moment of its adoption, unless the resolution or the
Laws prescribe a different time of entry into force. Any changes in the membership of the
Supervisory Council must be communicated to the Commercial Register of the Republic of Latvia.
Entries into the Commercial Register enter into force, with respect to third parties, on the day of the
announcement thereof.
2.15. Members of the Supervisory Council receive compensation for the execution of their official
duties in accordance with the procedure and in such amount as established by the Shareholders’
Meeting.
CHAPTER III
THE SCOPE OF AUTHORITY OF THE SUPERVISORY COUNCIL
3.1.
The Supervisory Council is responsible for the following:
3.1.1. election and recall of Management Board members and oversight of the operations of
the Management Board, as well as the appointment and recall of the Chairman of the
Management Board;
3.1.2. ensuring that the affairs of the Company are run in accordance with the Laws, the
Articles of Association and resolutions by the Shareholders’ Meeting and the
Supervisory Council;
3.1.3. reviewing the Company’s annual report and the Management Board’s proposals for
the distribution of profit, and compilation of a statement;
3.1.4. approval of transactions between the Company and members of the Management
Board or an auditor;
3.1.5. requesting that the Management Board call a Shareholders’ Meeting, providing the
reasons for doing so;
3.1.6. calling of a Shareholders’ Meeting if the Management Board has not done so in
accordance with the procedure prescribed by the Articles of Association;
3.1.7. prior review of all issues which are the remit of the Shareholders’ Meeting or
which, upon request by members of the Management Board or the Supervisory
Council members, have been put forth for discussion at the Shareholders’
Meeting, and expressing an opinion on such matters;
3.1.8. determining specific amounts to be paid to the members of the Supervisory
Council as compensation for their work, if the Shareholders’ Meeting, in
deliberating on the awarding of a compensation to members of the Supervisory
Council, has specified a total amount to be used for the Supervisory Council’s
compensation, or specified a share of the profit as compensation to the
Supervisory Council payable for its work.
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3.1.9. representing the Company in court in all claims brought by the Company against
members of the Management Board, as well as in all claims brought against the
Company by the Management Board;
3.1.10. bringing a claim in court against the Company to declare a resolution of the
Shareholders’ Meeting invalid.
3.1.11.
reviewing other matters specified by the Laws and the Articles of Association.
3.2. The Supervisory Council has the right at any time to request a report from the Management
Board regarding the state of affairs of the Company and review all operations of the Management
Board. The Supervisory Council may inspect the Company’s registers and documents, as well as the
treasury and the entire property of the Company.
The Supervisory Council may entrust this review to any member of the Supervisory Council or
instruct a specially appointed expert to conduct an inspection or clarify certain issues.
3.3. The Supervisory Council may instruct the Management Board to convene a Shareholder’s
Meeting, should the interests of the Company require it.
3.4. The Supervisory Council does not have the right to resolve issues which are the remit of the
Management Board. However, the Management Board must obtain the consent of the Supervisory
Council in resolving the following important matters:
3.4.1. approval of the Company’s strategy and issue of voting instructions for the approval of the
strategies of the Company’s group companies;
3.4.2. approval of the Company’s regular annual budget and issue of voting instructions for the
approval of the regular annual budget of the Company’s group companies;
3.4.3. approval of the Management Board Regulations;
3.4.4. acquisition of participation in another company, increase or reduction thereof; as well as the
issue of voting instructions with regard to the acquisition of participation in another company,
increase or reduction thereof, continuation or termination of operations, restructuring,
entering into a holding agreement by the Company’s group companies;
3.4.5. acquisition or conveyance of a venture and issue of voting instructions regarding the
acquisition or conveyance of a venture by the Company’s group companies;
3.4.6. opening or closing of a branch office or an agency;
3.4.7. acquisition, conveyance or encumbering with property rights of real estate and issue of voting
instructions with respect to the acquisition, conveyance or encumbering with property rights
of real estate by the Company’s group companies;
3.4.8. issue of such loans that are not associated with the customary commercial activity of the
Company, provision of guarantees and entering into cession agreements, issue of voting
instructions in the Company’s group companies on the issue of such loans as are not
associated with the customary commercial activity of the said companies, provision of
guarantees and entering into cession agreements;
3.4.9. entering into transactions exceeding USD 5,000,000 (five million US dollars) and issue of
voting instructions for entering into transactions exceeding USD 5,000,000 (five million US
dollars) to the Company’s group companies, except for the following transactions:
3.4.9.1.chartering of vessels in accordance with the “Vessel Chartering Regulations”;
3.4.9.2.bunkering of vessels in accordance with the “Vessel Bunkering Regulations;
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3.4.9.3.arranging for vessel repairs within the regular annual budget;
3.4.9.4.transactions within the Company’s group of companies;
3.4.9.5.transactions for the provision of public utility services and electronic communication
services;
3.4.10.issue of loans to Company employees and issue of voting instructions in the Company’s group
companies for the issue of loans to employees of the Company or the Company’s group
companies;
3.4.11.acceptance of loans and issue of voting instructions for the acceptance of loans by the
Company’s group companies, except as stipulated by Item 3.4.9.4;
3.4.12.initiation of new types of commercial activity and termination of existing types of activity and
issue of voting instructions for the initiation of new types of commercial activity and
termination of existing types of activity by the Company’s group companies;
3.4.13. issue of voting instructions to the Company’s group companies regarding their entry into
transactions of acquisition, conveyance or encumbering with property rights of vessels,
should the said transactions be entered into with companies not belonging to the Company’s
group of companies;
3.4.14.issue of voting instructions to the Company’s group companies regarding their entry into
transactions of conveying vessels to commercial management or technical management,
should the said transactions be entered into with companies not belonging to the Company’s
group of companies;
3.4.15. approval of the Company’s internal regulations if actions set out therein exceed authorisation
limits of the Management Board;
3.4.16. issue of voting instructions with respect of the approval and amendment of the articles of
association of the Company’s group companies;
3.4.17. issue of voting instructions with respect to the adoption of resolutions by the Company’s
group companies to bring a claim against any member of the management board, member of
the supervisory council, auditor, shareholder (participant) thereof, and to appoint a
representative for court proceedings;;
3.5. The Supervisory Council must perform an audit of a decision made or a transaction entered
into by the Company if a request has been made in writing by Shareholders who represent not less
than 10 (ten) percent of the Company’s equity capital.
The Supervisory Council must perform the said audit within 1 (one) month from the receipt
of the request.
If the Supervisory Council does not perform the said audit or does not reply to the Shareholders
who have requested it, the Shareholders have the right to submit the issue for review by the
Shareholders’ Meeting.
3.6. The Supervisory Council has the right to recall a member of the Management Board at any
time from fulfilling his or her duties, should important reasons exist. In any event, gross excesses of
authority, failure to fulfil obligations or failure to fulfil obligations in due manner, inability to
manage the Company, causing harm to the interests of the Company, as well as an expression of
non-confidence by the Shareholders’ Meeting shall be deemed such important reasons.
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3.7. Members of the Supervisory Council have the obligation to participate at the Shareholders’
Meeting.
CHAPTER IV
THE SCOPE OF AUTHORITY OF THE
CHAIRMAN AND THE DEPUTY CHAIRMAN OF THE SUPERVISORY COUNCIL
4.1.
The scope of authority of the Chairman of the Supervisory Council includes:
4.1.1. to be in charge of the operations of the Supervisory Council;
4.1.2. to control the execution of resolutions by the Supervisory Council;
4.1.3. to call Supervisory Council meetings and to determine the agenda of the said
meetings;
4.1.4. to ensure the work of Supervisory Council meetings, the taking of meeting minutes,
and to chair meetings of the Supervisory Council;
4.1.5. to enter into agreements with members of the Management Board once such
agreements have been accepted at a Supervisory Council meeting.
4.2. During an absence of the Chairman of the Supervisory Council (due to illness, business trips,
leave, etc.) or under his or her instructions, the duties of the Chairman of the Supervisory Council are
executed by the Deputy Chairman of the Supervisory Council within the scope of authority of the
Chairman.
4.3. Upon request by the Supervisory Council, the Chairman of the Supervisory Council reports
to the Supervisory Council on the execution of his or her duties.
CHAPTER V
SUPERVISORY COUNCIL MEETINGS AND THE ADOPTION OF RESOLUTIONS
5.1. The Supervisory Council deliberates on matters and passes resolutions at Supervisory
Council meetings, which customarily take place at the site of the Company.
If necessary, meetings of the Supervisory Council may take place at another location, as well as in
accordance with the procedure described in Item 5.16 of the present Regulations.
5.2. The Supervisory Council has the authority to pass resolutions if at least one-half of the
members of the Supervisory Council participate at a Supervisory Council meeting. The quorum is to
be determined according to the number of Supervisory Council members specified by the Articles of
Association.
5.3.
As a rule, the meetings of the Supervisory Council are closed ones.
5.4. Members of the Management Board may participate in Supervisory Council meetings
without voting privileges.
5.5. Supervisory Council meetings are called by the Chairman of the Supervisory Council not less
than once per quarter. If necessary, Supervisory Council meetings may be called more frequently
upon initiative of the Chairman, Deputy Chairman or a member of the Supervisory Council or the
Management Board. The initiator of the convocation must provide good reasons for the need and
purpose for the convocation of such a meeting.
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5.6. Should the Chairman of the Supervisory Council fail to fulfil the request by the Deputy
Chairman or member of the Supervisory Council or the Management Board within two weeks of
receipt of the said request, the initiator of the convocation may, upon explaining the circumstances of
the matter, call a meeting of the Supervisory Council by himself or herself.
5.7. The Chairman of the Supervisory Council notifies the members of the Supervisory Council of
the time and venue of the ordinary Supervisory Council meeting not later than 3 (three) business
days prior to the said meeting.
5.8. The agenda of a Supervisory Council meeting is defined by the Chairman of the Supervisory
Council, taking into consideration the matters submitted for review at the Supervisory Council
meeting by the Management Board and members of the Supervisory Council.
5.9. The agenda for the Supervisory Council meeting and the materials to be reviewed at the said
meeting, as well as draft resolutions regarding items on the agenda must be submitted to the
Supervisory Council members at least 5 (five) business days before the ordinary Supervisory Council
meeting.
The Chairman of the Supervisory Council must ensure that the meeting agenda and the materials to
be reviewed at the meeting be issued to the members of the Supervisory Council in prompt fashion.
5.10. At least 4 (four) business days prior to the ordinary Supervisory Council meeting, the employee
whose duty is to take the minutes of the Supervisory Council meetings (hereinafter - the Secretary of
the Supervisory Council) submits the proposed agenda of the meeting and the materials to be
reviewed at the Supervisory Council meeting for approval by the Chairman of the Supervisory
Council.
5.11. Each member of the Supervisory Council member is entitled to request additional information
from the Management Board regarding the issues to be reviewed at the Supervisory Council meeting.
Such information is to be additionally prepared and submitted by the time of the Supervisory Council
meeting.
5.12. The Supervisory Council may consider issues not included in the agenda of the Supervisory
Council meeting in accordance with the present Regulations, if the Supervisory Council passes a
resolution to incorporate such issues into the agenda of the Supervisory Council meeting.
5.13. Supervisory Council resolutions are passed by a simple majority of votes. Should a member of
the Supervisory Council oppose a Supervisory Council resolution and vote against it, the separate
views of the said member must be recorded in the minutes of the Supervisory Council meeting upon
his or her request.
5.14. Each member of the Supervisory Council has one vote.
5.15. Minutes are kept at the Supervisory Council meetings.
5.16. If necessary, the Chairman of the Supervisory Council may call meetings of the Supervisory
Council without the observance of the procedure defined by Items 5.7 and 5.9-5.10 of the present
Regulations and hold the same by co-ordinating the issues and adopting the resolutions by means of
facsimile communications devices or e-mail with the precondition that used communication devices
allow Supervisory Council members to participate in the discussions and the resolution making
process simultaneously and this activity is respectively recorded in the minutes.
The secretary of the Supervisory Council sends the draft resolutions on the issues to be
reviewed, materials needed for adopting the resolutions, a cover letter signed by the Chairman of the
Supervisory Council as well as a form for recording the votes on the respective resolutions
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simultaneously to all the members of the Supervisory Council by facsimile communication devices
or e-mail, at the choice of respective member of the Supervisory Council. Voting is conducted by a
member of the Supervisory Council member by putting his or her signature in the corresponding box
of the voting form received – “for” or “against” – and returning the signed voting form to the
secretary of the Supervisory Council within 12 (twelve) hours from receipt of the documents, using
facsimile communications devices or e-mail at the choice of respective member of the Supervisory
Council. The voting form must contain the following items: the title “Voting Form of the
Supervisory Council of JSC Latvian Shipping Company”; date of dispatch; addressee, i.e. the
specific member of the Supervisory Council for whom the voting form is intended; the draft
resolution proposed; boxes “for” and “against” wherein the member of the Supervisory Council is to
put his or her signature.
A resolution is passed if more than one-half of all members of the Supervisory Council have
voted affirmatively in accordance to the aforementioned voting procedure.
Upon the end of voting, in observance of the rules of Item 6.2 of the present Regulations, the
secretary of the Supervisory Council compiles a report in which he or she indicates that votes that
have been cast using facsimile communications devices or e-mail and which is signed by the
Chairman, the secretary and members of the Supervisory Council who have participated in the voting
and cast their votes using facsimile communications devices or e-mail. Draft resolutions and voting
forms are attached to the report.
CHAPTER VI
MINUTES OF SUPERVISORY COUNCIL MEETINGS
6.1.The course of a Supervisory Council meeting is recorded in the minutes of the said meeting.
6.2. The minutes of a Supervisory Council meeting are compiled in accordance with the present
Regulations and the Laws.
6.3. Uptill the next Supervisory Council meeting, the meeting minutes are signed by the Chairman of
the Supervisory Council, all members of the Supervisory Council who have participated at the said
meeting, as well as by the secretary of the Supervisory Council.
6.4. The minutes of a Supervisory Council meeting are supplemented with attachments thereto, as
well as the materials of the Supervisory Council meeting, and the same are deemed to be an integral
part of the Supervisory Council meeting minutes, forming an attachment thereto.
CHAPTER VII
RESPONSIBILITY OF THE SUPERVISORY COUNCIL
7.1. All members of the Supervisory Council must execute their duties as worthy and careful
managers in accordance with the Laws, the Articles of Association, resolutions by the Shareholders’
Meeting and the Supervisory Council, as well as in accordance with the present Regulations.
7.2. The Supervisory Council stands accountable to the Shareholders’ Meeting with respect to the
operations of the Company and the resolution of matters relating to the Company’s development.
7.3. Members of the Supervisory Council are jointly responsible for any losses they have caused
for the Company; however, they are not responsible for any losses caused to the Company if the
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members have acted in good faith within the limits of a legitimate resolution by the Shareholders’
Meeting.
7.4. All members of the Supervisory Council are responsible for the adequate preservation within
the Company and non-disclosure of the Company’s commercial secrets, internal and confidential
information.
JSC Latvian Shipping Company
Chairman of the Supervisory Council
Simon Boddy
February 26, 2013, Riga
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