The deadline for filing annual reports with the State Revenue Service (SRS) is approaching.

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 the 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. 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 set forth in the Law on Annual Reports, as well as companies whose articles of association or shareholders’ meeting require the annual report to be reviewed by an auditor), the Commercial Law states that before approval of the annual report a board proposal must be prepared on distribution of profit (in case of losses – on improvement of financial status) and, if the company has a council, a report from the council on the annual report. Further, under the Law on Groups, dependent companies must prepare a statement of dependence, unless a group agreement has been concluded.

The annual meeting of shareholders for approval of the annual report must be held no later than the above deadline, and notice convening the meeting must be sent to shareholders of 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 shareholder’s meeting or shareholders’ meeting minutes (or an extract) approving the annual report.

The Euro is coming!

Joining the Eurozone on 1 January 2014

Latvia is on its way to joining the Eurozone. As a result, the official currency of Latvia – lats, will be replaced by the euro. The Law on the Procedure for Introduction of the Euro which came into effect on 1 March 2014 provides an outline for transition to the euro. Practical aspects of introducing the euro are being widely discussed by the general public, especially how prices of goods will be indicated during the transition period or how non-cash money will be converted into euros as well as how long after introduction of the euro will exchange of cash from lats to euros be allowed.

Amendments to companies’ corporate documents

Introduction of the euro will also impact the corporate documents of companies as the nominal value of shares will have to be expressed in euros. Thus, amendments to company articles of association will be required. The nominal value of shares in a limited liability company (SIA) will have to be expressed in whole euros, while the nominal value of shares in a joint-stock company (AS) may be expressed in euros and cents.

The change in the nominal value of company shares will have to be made within 30 months as of the date of introduction of the euro. However, for amending the company’s articles of association, the management board will have to convene the shareholders meeting in order to approve the amendments to the articles of association. But if a company fails to update its articles of association within the deadline, formally this can amount to a reason for the Company Register to apply to the court to terminate the company’s activity due to noncompliance of corporate documents with the law.

Compared to existing companies, companies under establishment will already be allowed to express their share capital in euros as of announcement of the change in the official exchange rate from lats to euros, ie approximately six months before the date of introduction of the euro.

Exchange rate of lats to euros

The official exchange rate of lats to euros that is expected to be applied when joining the Eurozone will be announced in mid-July 2013.