As some of you may have heard, reform of the Commercial Law is still continuing in Latvia. The reform itself is very important, as it involves almost each and every company operating in the country. All Latvian companies have to re-register themselves with the commercial register until Dec. 31, 2004. Thus there is no difference whether the entity is owned by a foreigner or a local. Any company that fails to accomplish the requirements of the law will be liquidated as of Jan. 1, 2005, and no further business activities will be allowed.
Why should I do that? In 2002 reform of the Commercial Law was launched in Latvia in order to align legislation related to commercial activities and to integrate the respective EU directives, as well as to protect business activities and interests of participating parties. The achievement of those objectives resulted in the passing of the new Commercial Law and the related Law on Enforcement of the Commercial Law. Both laws have been in force since Jan. 1, 2002.
Starting next year there will be only five types of business entities in Latvia, instead of 13 as it is now. This is why these laws also stipulate the procedure for re-registration of companies operating in Latvia. According to the data collected by the enterprise register database Lursoft, at the present moment approximately only 17,000 out of approximately 137,000 entities have been re-registered.
How can I re-register? The re-registration of a limited liability company or of a joint stock company can be executed by restructuring the company or amending the articles of association. In this case, amendments to the articles of the association mean that they can be simplified. Until the re-registration of the limited liability company has been carried out, no other amendments to the articles of association (the board, legal address, etc.) can be registered with the register. According to the rules, the examination of the application for re-registration will take from two to 15 days. However, the majority of companies are applying for re-registration only now, so in practice the re-registration cannot be made within a couple of days anymore.
In relation to branches and representative offices, the following procedures have to be applied. A branch has to apply for re-registration concurrently with the application for registration, or according to the decision of an owner. A registered representative office of the enterprise entitled to conduct business activities has to submit the application in the same manner as a branch. Nevertheless, it shall be taken into consideration that no application can be submitted before the owner of the branch is not re-registered. And vice versa: if the owner of the branch is excluded from the commercial register, the branch will be automatically excluded as well.
A permanent representative office of a foreign company has to apply for re-registration as a branch or a capital company, or liquidation procedures are implemented according to the decision of an owner.
What will be the consequences? Companies not re-registered - and if no decision on liquidation of the company is made within the established time frame - will be liquidated. The liquidation procedures will be carried out by officials of the commercial register, and property left by the entity will be considered as escheat under the Civil Law.
It is worth mentioning that companies with foreign investments entitled to a tax relief shall continue to apply such relief also after the registration with the commercial register, but until Dec. 31, 2005, at the latest.
So, either re-register or stay out of the game!
Gints Vilgerts is a partner at Sorainen Law Offices in Riga
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