Deadline approaching for filing annual reports with the State Revenue Service (SRS).
Under the Law on Annual Reports, all companies must 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:
- larger companies that comply with the criteria set by the Law on Annual Reports and
- the parent company of a group of companies which prepares a consolidated annual report.
These companies may file their annual report no later than seven months after the end of the reporting year.
In addition to the annual report and the auditor’s statement on the annual report (for those companies that satisfy the criteria listed in the Law on Annual Reports, 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 improvement of financial status) and, if the company has a council, a report from the council on the annual report. Moreover, under the Law on Groups, dependent companies must prepare a statement of dependence, unless a group agreement has been concluded, in which case this must be filed with the Commercial Register.
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 last mentioned 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.
The annual report must be filed only with the SRS, along with explanations on approval of the annual report by the shareholders’ meeting or shareholders’ meeting minutes (or an extract) approving the annual report.
Amendments to corporate documents in relation to the euro
As a result of introduction of the euro a company’s share capital and the old nominal value of a share in lats must be expressed in euros. To do so, the board should convene a shareholders’ meeting as required by law and the articles of association. The agenda of the shareholders’ meeting must contain an item on changing the denomination of share capital from lats to the euro and another item on amendments to the articles of association.
The re-denominated nominal value of the share capital and a single share in euros must be filed for registration with the Commercial Register.
Although the deadline for filing the documents with the Commercial Register in relation to changing the share capital to euro is still far ahead – 30 June 2016 – we advise planning these changes well in advance. Starting from 1 July 2014, changes to a company’s articles of association are accepted for registration with the Commercial Register only if they include the change of denomination of share capital from lats to the euro. Please consider including this issue of re-denominating the share capital in the agenda of the annual general meeting of shareholders approving the annual report (or in the agenda of any other upcoming shareholders’ meeting).
For more information on changing the denomination of the nominal value of shares from lats to the euro please follow the link.
Information on planned changes to taking a position on a management board
Upcoming changes to the law may affect ease of doing business in Latvia as they come with stricter requirements as to the citizenship of company management board members. On 1 January 2015 amendments to the law On the Company Register of the Republic of Latvia came into effect. Under its transitional provisions, as soon as the respective changes are also implemented to the Commercial Law, then at least one of the management board members of a company will have to be either a citizen of Latvia or a non-citizen of Latvia (a special status under Latvian law granted to former citizens of the USSR and their children upon meeting a number of requirements), or a citizen of an EU member state, an EEA state or the Swiss Confederation.
The proposed restriction concerning the citizenship of management board members is highly criticized as being disproportionate. Therefore it is unknown if and when these amendments to the Commercial Law will be adopted by the parliament. We also remind you that in 2014 a number of significant amendments to the law were adopted with respect to the liability of management board members. For more information please follow the link.