Latvian commercial law put on hold

RIGA - The long-discussed Latvian commercial law, which was due to come into
effect Jan. 1, 2001, was postponed for another three months due to
the lack of financing for its enactment.

In its last session before Christmas, Dec. 21, the Latvian Parliament
decided to postpone the enactment of the law by Apr. 1, 2001 and
ordered the government to provide the necessary financing.

"Although the law has been in preparation for five years, everything
related to its enactment was left to the last day," Valdemars Gavars,
the director general of the Latvian Chamber of Commerce, told
journalists.

He said Latvian businessmen are generally positive about the new law,
but there are several drawbacks that need to be solved.

The commercial law will form the basis for the business environment
in Latvia, Andris Denins, the representative of the Latvian Chamber
of Commerce, told journalists.

Under the law, the number of entrepreneurship forms will be
significantly reduced in Latvia, from around 10 to only five.
Numerous companies will have to amend their statutes and re-register
in the new Commerce Register's data base under the Register of
Enterprises.

"In the 1990-2000 period, many laws related to entrepreneurial
activity were passed separately, but now with the commercial law they
will all be merged into a single law," Denins said.

"The system was a bit chaotic before," said a Stockholm Law School
graduate, lawyer Lolita Kronberga. The new commercial law will
regulate entrepreneurial activities, while the former ones regulated
their subjects, she said.

Under the new law, the company's name will be the entrepreneur's
"trade mark" to be registered on the new data base and used in
signing contracts. Therefore different companies will not be allowed
to have identical names even if their entrepreneurship forms are
different, as is now the case, she stressed.

Some 100,000 companies will be subject to re-registration in the
Commerce Register and costs related to the re-registration will have
to be covered almost entirely by companies.

The budget has not allocated sufficient funds to the Register of
Enterprises for the introduction of the commercial law, therefore the
register's workload would increase two-fold with no new staff hired,
Latvian Justice Minister Ingrida Labucka told reporters.

In the meantime, it is expected to cause queues and the fulfillment
of other functions of the Register of Enterprises would also be
endangered, which would trigger dissatisfaction with the reform
implementation process.

The minister stressed the source of financing should be found during
the coming three months. Initially 850,000 lats ($1.36 million) were
requested for the introduction of the commercial law, but today the
requested amount has been reduced to 377,000 lats for computer
software and between 200,000 and 300,000 lats for wages.

The new law will affect the work of limited liability companies most
of all, Denins stressed. The liability of their board and council
towards creditors and shareholders will be increased significantly,
and the burden of proof in case of conflict now has been put on them,
Kronberga said. "Taking into account the 'race principle' in civil
trials, it is easier for a defendant to acquire all the necessary
documents to acquit himself," she said.

The commercial law complies with EU standards, and only after its
adoption was Latvia able to close the legislation chapter in
negotiations with the EU in November last year.