Another transit business giant might go into liquidation - JSC Latvijas naftas tranzīts

In June this year, the Regional Administrative Court rejected the appeal of Rudolfs Meroni-controlled JSC Latvijas naftas tranzīts (LNT) against the decision of the Chief State Notary of the Enterprise Register (ER) not to register the true beneficiaries of LNT as the LNT Board wanted to declare them.

There is no doubt that the information about the true beneficiaries was coordinated by the LNT Board with the LNT Council, or, to call things as they are - the Board declared those who were named by the Chairman of the LNT Council R. Meroni.

But ER did not believe that the declared ones are really the true beneficiaries of LNT.

Thus, the decision of the Regional Administrative Court means that the management of LNT, where R. Meroni is the chief, is still unable to comply with the requirements of the law and disclose reliable information about the true beneficiaries of this rather rich joint-stock company.

The consequence of this is that ER may terminate the operation of LNT.

One more chance

As Dace Zandfelde, Public Relations Specialist of ER, informed Neatkarīgā, “from the information available on the Latvian court portal it can be concluded that Latvijas naftas tranzīts filed a cassation appeal against the judgment of the Administrative Regional Court on July 8, 2021”.

This means that the management of LNT has another chance to achieve something in the Senate of the Supreme Court.

In addition, "the Register has not yet taken any decision to terminate the operations of Latvijas naftas tranzīts. The Register has no grounds to decide on the termination of Latvijas naftas tranzīts on the grounds that it has not disclosed information on its true beneficiaries, as Latvijas naftas tranzīts has submitted the said information to the Register, and a dispute regarding the registration of this information is currently pending in court”.

Who is the real controller?

Almost two years ago - in October 2019 - LNT submitted an application for ER to register three persons as LNT's true beneficiaries - R. Meroni's accountant from Austria Ursula Harrand, "Aivars Lembergs/his family" and Rudolfs Meroni himself.

ER refused to register such true beneficiaries.

LNT's management had declared three "chains of control" as to why these three persons should be registered as the true beneficiaries.

1. Ursula Harrand was the true beneficiary because she indirectly owned more than 25% of LNT shares through JSC Ventbunkers and two other foreign companies.

Looking at it logically, such an application cannot be believed, because U. Harrand had not been previously been listed among the shareholders of JSC Ventbunkers. If indeed this person has become a shareholder of JSC Ventbunkers, then a publicly unknown transaction has taken place, including with the seized property, and it should be investigated by law enforcement authorities.

2. According to the management of LNT, the true beneficiary is also “Aivars Lembergs/his family”, as this person indirectly owns more than 25% of LNT shares, including through JSC Ventbunkers.

Legal disputes over whether such a natural “person” (the true beneficiaries are natural persons) as considered by R. Meroni - “Aivars Lembergs/his family” - really exists and whether it really indirectly owns more than 25% of LNT shares are not over yet in Latvian criminal courts. However, the said “person” does not control 25% of LNT's capital in any way - there is no doubt about that. Consequently, declaring such a true beneficiary is simply absurd.

3. On the other hand, according to the management of LNT, the true beneficiary Rudolfs Meroni has neither direct nor indirect participation in LNT.

"R. M. exercises indirect control over the shareholder structure, which owns the majority of the Company's shares," the LNT management application is quoted in the ER decision. The ER decision also states that “Among other things, the application is accompanied by several documents - decisions on the seizure of property”.

This is an obvious truth - the decisions of prosecutors to seize property and the court's acceptance of these decisions have given R. Meroni full control over the Ventspils transit business, including the richest component of this business - LNT.

Indeed, none other than Rudolfs Meroni is the true beneficiary of JSC Latvijas naftas tranzīts, whose share capital is 105 million euros, which fairly accurately reflects the actual value of its assets!

We don't want to reveal!

ER did not register these declared true beneficiaries of LNT because no “full and consecutive chain of legal entities” through which control is exercised was submitted, as well as no “full documentary justification of control exercised by all three true beneficiaries was submitted, as well as clarification is needed on control carried out by /pers. C/, indicating the specific type of control". It is understood from the context that /pers. C/ is meant to be R. Meroni. So, ER especially wants to find out the mechanism by which R. Meroni controls LNT.

ER's decision not to register the true beneficiaries was initially appealed to the Administrative District Court.

The management of LNT argued for the appeal with the fact that “there is no legal norm that would grant the Enterprise Register the right to require the applicant to indicate in addition to the direct participants also the whole chain of legal entities through which the true beneficiary exercises control over the applicant”.

"The requirement of the Enterprise Register to submit for registration the entire chain of control is considered to be a disproportionate interference in the relationship between the applicant and its members by publishing too much information."

"The law does not stipulate that the Enterprise Register must have the same amount of information on the true beneficiary as the company's board."

Two court instances: "Documents must be presented!"

Two court instances have now said that it will still be necessary to present documents confirming that LNT indeed has the three above-mentioned true beneficiaries, as ER is obliged to provide "adequate, correct and up-to-date information on the legal entity's true beneficiaries".

LNT is “obliged to provide information and documents confirming this information about the chain of all legal entities through which the applicant's true beneficiaries exercise control over the Company” - says the judgment of the Regional Administrative Court.

It also emphasizes that the board of LNT “must also find out the specific way in which the true beneficiary exercises control. Consequently, the initial decision rightly states that the Company must supplement the information about /pers. C/, indicating the specific type of control he exercises as the true beneficiary". As already mentioned, with /pers. C/ probably means R. Meroni.

The law has been changed

As has been written several times, the above-mentioned trio of true beneficiaries with an absurd justification of “chains of control” (for example, that the father controls the economic activities of his adult children) had already been registered by several companies in ER, including LNT's parent company JSC Ventbunkers. However, LNT submitted its application for the declaration of the above-mentioned trio as LNT's true beneficiaries later and in the meantime, the law was amended, stipulating that ER no longer simply registers the true beneficiaries declared by the company's management but also checks the documents.

The judgment states: “Amendments to the Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing (hereinafter - the Prevention Law) entered into force on June 29, 2019, extending the competence of the Enterprise Register in the verification of the submitted information on the true beneficiaries, establishing the right of the Enterprise Register to perform a more in-depth verification of the submitted information on the true beneficiaries.

In the present case, an application has been submitted to the Enterprise Register stating that the true beneficiaries of the Company exercise control over the Company through its shareholders, some of whom are foreign legal entities. It is not possible to verify the truthfulness of the information provided in the application from the documents attached to the application. Until the applicant has submitted a full documentary justification to the Enterprise Register about the control exercised in the Company by /pers. B/, /pers. A/ un /pers. C/, the Enterprise Register cannot verify and there is no legal basis to register information on the true beneficiaries of the applicant in the Commercial Register.”