Possibility to extend approaching deadline for filing annual reports with the State Revenue Service (SRS)
The Law on Annual Financial Statements and Consolidated Financial Statements requires all companies to file with the SRS an annual report ‒ approved by the shareholders’ meeting ‒ no later than one month after approval and no later than four months after the end of the reporting year. This means that if a company’s reporting year is the same as the calendar year, the deadline is 30 April. An exception is made for:
- medium and large companies complying with the criteria set by the Law on Annual Financial Statements and Consolidated Financial Statements; and
- parent companies of a group which prepares a consolidated annual group report.
These must file an annual report and consolidated annual report (if prepared) with the SRS within seven months after the end of a company’s reporting year.
Due to the COVID-19 pandemic, as a part of precautionary measures, the deadline for preparing and filing annual reports for 2019 can be prolonged at least to 31.07.2020 (i.e. three months later than under the ordinary procedure). There is no need to coordinate prolongation of filing of the annual report with the SRS.
In addition to the annual report and auditor’s statement on the annual report (for companies that meet the criteria listed in the Law on Annual Financial Statements and Consolidated Financial Statements as well as companies whose articles of association or shareholders’ meeting requires the annual report to be reviewed by an auditor), the Commercial Law requires a board proposal to be prepared before approval of the annual report on distribution of profit (or in the case of losses on improving company financial status) and, if the company has a council, a report from the council on the annual report. Moreover, under the Law on Groups of Companies, dependent companies must prepare a statement of dependence to be filed with the Commercial Register, unless a group agreement has been concluded.
The annual meeting of shareholders to approve the annual report must be held no later than the deadline mentioned above. A notice convening the meeting must be sent to shareholders of private limited liability companies at least two weeks before the meeting, while for joint-stock companies the deadline is at least 30 days before the meeting. Along with the notice convening the meeting, the following must be sent to shareholders: the annual report, statement of dependence, auditor’s statement, a report from the council and board proposal. Joint-stock companies need not append these documents to the notice convening the meeting as long as the notice contains information about the place and time where the shareholder may access them at the registered address of the company. However, considering that at the moment during the COVID-19 pandemic Latvia encourages social distancing among people and currently it is not clear what additional precautionary measures might be announced, it would be advisable to post (mail) the documents to shareholders.
Recently adopted amendments to the Commercial Law are important for approval of the annual report; however they could also apply to other situations, namely the management board can convene a shareholders’ meeting allowing the shareholders to participate and vote at the meeting by electronic means. Holding the meeting by electronic means alone will also be allowed.
The annual report must be filed only with the SRS, along with explanations on approval of the annual report by the shareholders’ meeting.
The annual report must be signed not only by the board or an authorised member of the board but also by the company’s in-house or outsourced accountant (criteria are listed in the Law on Annual Financial Statements and Consolidated Financial Statements and the co-signing duty of the accountant applies to the financial statements and consolidated financial statements).
Company representation during COVID-19 and implementing corporate changes
We recommend verifying that the representation rights of the management board of a company are still valid (ie, that the term of office of the management board members has not expired). If all the management board members are foreigners and do not reside in Latvia, consider ensuring that the company has an authorised representative in Latvia with appropriate powers of attorney to represent the company, if necessary, in different matters (eg, in relation to employees, state authorities, banks, or cooperation partners).
When planning changes in the management board or council, or changes in the composition of the shareholders, or a decrease or increase of the share capital, or amendments to the articles of association, take into account that due to the COVID-19 pandemic various restrictive measures have been implemented across different countries and in many places the public authorities are closed for visitors. This may affect the time needed to order the necessary official extracts, to confirm documents and signatures by a notary public, or to legalise documents.
At the moment, the Commercial Register is also closed to the visitors on-site; so, before planning corporate changes, evaluate whether you will send signed documents in paper form or whether it is possible to organise signing using a secure electronic signature with a time stamp, and file the application with the Commercial Register electronically.
Duty to file information with the Latvian Commercial Register on the beneficial owners of branches and representative offices of foreign companies
Starting from 01.07.2020 all branches and representative offices of foreign companies must file information on their beneficial owner with the Latvian Commercial Register. If a foreign company has not registered a branch or a representative office at the Latvian Commercial Register but has registered as a taxpayer with the State Revenue Service (SRS) for carrying out business in Latvia, then information on the ultimate beneficial owner will have to be filed with the SRS.
By law, a beneficial owner is a natural person who owns more than 25% of the shares or voting rights in a legal entity through direct or indirect shareholding or who controls them directly or indirectly. Along with the notification on the beneficial owner, you will also have to submit documents (extracts from the commercial registers of foreign countries or other documents of public credibility) supporting the chain of control up until the beneficial owner.
Please make sure that your company operating in Latvia has given information on its beneficial owners and is organising the supporting documents to be able to file the information and documents with the Latvian Commercial Register or the SRS (if applicable) on beneficial owners starting from 01.07.2020 and up until the deadline of 01.01.2021. The Commercial Register or the SRS will be entitled to exclude the company from their register for failure to supply information and supporting documents on beneficial owners before 01.01.2021.