Latvian Corporate Newsflash - March 2013
Latvijas korporatīvo tiesību ziņas latviešu valodā Jūs varat lasīt šeit: In Latvian

  Eva Berlaus
Eva Berlaus
Office Managing Partner
  Zane Paeglīte
Zane Paeglīte
  Jānis Bite
Jānis Bite
Senior Associate
Dear clients and cooperation partners,

The current year has brought new amendments to the Commercial Law. These mainly refer to the company liquidation procedure. Additionally, the Commercial Law now contains a new procedure for suspending operations of a commercial entity. The amendments also set limits on a natural person doing business or occupying certain positions following decisions during criminal proceedings or proceedings involving administrative violations.

I. Liquidation of company operations

The amendments significantly extend the range of subjects who can initiate liquidation of company operations. These rights are also granted to the tax administration when a company persistently fails to file annual reports or returns required by tax laws or when company operations are suspended on the basis of a decision by the tax administration. In addition, any third party whose lawful interests are violated will have the right to initiate liquidation if a company’s share capital does not comply with statutory requirements or the company fails to file data or documents with the Company Register as required by law.

Meanwhile, the amendments simplify the procedure for terminating company operations if grounds exist to do so but no person interested in liquidating the company applies to the court or the commercial register for appointment of a liquidator and insolvency proceedings have not been initiated. In these cases company operations can be terminated without liquidation or insolvency proceedings by a decision of the Company Register. However, property remaining after termination of company operations will be considered escheated property and will belong to the state. These amendments presumably aim at finding a solution to the frequent problem in practice when companies registered in the commercial register keep existing only formally as they do not actually do any business and do not file data or documents with the Company Register as required by law.

Last of all, the amendments clarify previous uncertainties as to what to do with creditors' claims that cannot be satisfied upon liquidation when a known creditor does not file a claim, does not accept enforcement or its claim cannot yet be enforced. From now on, these payable amounts can be deposited with a sworn notary according to the legal address of the company.

II. Procedure to suspend operations of a commercial entity

The amendments to the Commercial Law establish a new procedure for suspending the operations of an individual trader, company or partnership (a commercial entity). The procedure will come into force on 1 January 2014, after required changes to other regulatory enactments. So far, operations of a commercial entity could not actually be suspended because despite suspension of operative activities the commercial entity had to observe all the same regulations that relate to active commercial entities, for example, regular reporting to the tax administration. Under the amendments, operations of a commercial entity can be suspended or restored on the basis of the commercial entity’s own decision if several preconditions are met:

  1. the commercial entity may not have outstanding debt liabilities;
  2. the commercial entity may not have employees;
  3. annual, financial and business operation reports are filed;
  4. creditors' claims are settled with regard to liabilities that have to be settled before or during suspension of business operations;
  5. creditors' claims are secured if they have to be settled after suspension of the operations of the commercial entity.

Additionally, the amendments provide that operations of a commercial entity can also be suspended or restored on the basis of a decision by the tax administration or in criminal proceedings.

Suspension or restoration of operations of a commercial entity comes into force when an entry is made in the commercial register.

III. Limits on natural persons engaging in business or occupying certain positions

Finally, the Commercial Law amendments set limitations to be observed by a natural person where decisions in criminal proceedings or administrative violation proceedings limit or terminate a natural person's rights to a certain kind or all kinds of business or rights to occupy certain positions in company management institutions (for example, management board or supervisory board) or to be a branch representative, procura holder or holder of a regular commercial proxy.

Karin Madisson
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Pärnu mnt 15
10141 Tallinn
phone +372 6 400 900
fax +372 6 400 901
Eva Berlaus
Office Managing Partner
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Kr. Valdemāra iela 21
LV-1010 Riga
phone +371 67 365 000
fax +371 67 365 001
Algirdas Pekšys
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Jogailos g 4
LT-01116 Vilnius
phone +370 52 685 040
fax +370 52 685 041
Maksim Salahub
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ul Nemiga 40
220004 Minsk
phone +375 17 306 2102
fax +375 17 306 2079

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