New law simplifies business

  • 1998-10-22
  • Anastasia Styopina
RIGA - Commercial activity in Latvia is regulated by multiple laws that were passed when the country had just learned about market economies. Now that business has outgrown its cradle of seven years ago, it needs new legislation to develop further.

Last week, the Latvian Cabinet of Ministers adopted a new commercial law that would replace 12 existing laws and will correspond to European Union directives by defining a company's responsibility toward its creditors.

When the first laws were adopted, there was no need to harmonize them with EU policy. But times change, and since the country's main goal is membership in Europe's most prominent club, it had to change its legislation.

Aigars Strupiss, head of the work group that prepared the commercial law, said the main problem with existing laws is they do not include the main EU entrepreneurship principle. In other words, they do not define the legal status of commercial information available to the public.

According to current laws, information about a company entered in the Latvian Enterprise Register is not binding. It might or might not be used as evidence, for example, if the company were to end up in court if an investor accused it of providing false information.

Under a new law, a company is responsible for the information it provides to the register and can be taken to court if another party suffers due to the company's misinformation, Strupiss said.

The law will also simplify commercial activity by redefining enterprise status. According to existing laws, there are 13 enterprise types, but the new law will cut it down to five.

Strupiss said this moves Latvia closer to other European countries, which have four to seven enterprise types.

The new law divides all commercial activity into individual or corporate entrepreneurship. It used to be divided into individual, family, corporate and one-owner entrepreneurship.

Those changes will mostly affect individual entrepreneurs. The Enterprise Register counts about 60,000 different individual businesses.

According to the new law, an individual may reorganize his business as a joint stock company or limited liability company. Other enterprises, like state and municipal companies, have two years to reorganize or else face liquidation through the courts.