How to avoid delays of registration in the Company Register?

When establishing a company or changing its management board, article 416 of the Law “On the Register of Companies of the Republic of Latvia” (likums “Par Latvijas Republikas Uzņēmumu reģistru”) may turn out to be a cornerstone in the process. This article conveys the obligation of the Company Register (the “Company Register”) to extend the document review period for 10 working days to send the information about the received documents to the State Revenue Service (the “State Revenue Service”).

One of the reasons for forwarding documents to the State Revenue Service is if the company’s board member or holder of procuration is a management board member or a representative member, or holder of procuration in several legal entities registered in the Company Register. How many constitute “several legal entities registered in the Company Register” is not publicly defined and follows from the interdepartmental agreement between the Company Register and the State Revenue Service. In practice, this number can change quite often, therefore, if the company provides documents for registration of the corporate changes and the registration of these changes is urgent, the following must be considered.

This situation can affect the registration of corporate changes in two ways. Firstly, it extends the time for document review, so the company should anticipate this factor in time, especially if the registration of changes or the establishment of a company is urgent. Secondly, if the State Revenue Service finds that a member of the management board of a company, in their opinion, does not fulfill his duties in other legal entities as a good and careful owner and may not be able to successfully carry out future commercial activities, the Company Register can decide to refuse the registration of changes. The State Revenue Service may find that a person does not fulfill his duties as a good and careful owner, if at least in one of the legal entities in which the relevant person is registered, there is a debt of state fees, if no annual reports have been submitted or no reports on the type of activity of the legal entity have been submitted to the State Revenue Service.

In order to avoid negative consequences, we recommend before submitting the documents to the Company Register to check whether in all legal entities, where the relevant person is registered:

  1. state fees have been paid (even apparently small state fee debts must be paid);
  2. all annual reports have been submitted;
  3. reports on the type of activity of the legal entity have been submitted to the State Revenue Service.

If before the submission of the documents to the Company Register, the management board of the company determines that all the above has been fulfilled, then there should be no reason for concern.

However, we underline it will not be possible to bypass the above-mentioned 10 working day extension, therefore in urgent cases it is worth considering whether it is possible to elect management board members, who are not registered in several other legal entities.

by Elizabete Bartansone, Junior associate, Latvia

Team

Elīza Grīnvalde

Head of Corporate / AML Specialist (CAMS)

+371 22 403 488

eliza.grinvalde@vilgerts.comEmail

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