Establishment of a Limited Liability Company (SIA) in Latvia

I. Introduction

This memorandum is designed to provide general information regarding a Limited Liability Company (“Sabiedrība ar ierobežotu atbildību” or “SIA”) in Latvia and an overview of the requirements and costs for establishing such a company.

The following Latvian legal acts were reviewed for the purpose of preparation of the present Memorandum:

1. 1)The Latvian “Commercial Law”, entered into force on January 1, 2002.
2. 2)The Latvian “Law on the Enterprise Register”, entered into force on
3. 3)The Latvian “Law on Annual Accounts”

II. Private Limited Liability Company (“Sabiedrība ar ierobežotu atbildību” or “S.I.A.”) in Latvia

The Private Limited Liability Company (hereinafter “SIA”) is one of the most common forms of business establishment in Latvia.

According to the Latvian Commercial Law, a SIA is a company that has its share capital divided into private company’s shares. The SIA has a legal personality that is separate from the legal personality of its shareholders. The shareholders of a SIA are not liable for the obligations of the SIA. Their liability is limited to the extent of their investments into the SIA.

The minimum founding capital required by Latvian legislation for a SIA is 2,000 Latvian Lats (LVL) which amounts to approximately € 3, 067 Euros. The founding capital may be paid in money or in material assets (in such case, the assets must be appraised).

There are no restrictions on the number of shareholders in a SIA. No legislative limitations also apply to the ownership of companies by foreign citizens.

A shareholder of a SIA may freely transfer the shareholder’s shares to another shareholder. The shareholders are vested with a priority right to purchase the shares of a SIA that are sought to be transferred to third persons.

The Latvian Commercial Law calls for setting up of two obligatory management bodies within a SIA–the Shareholders’ Meeting and the Management Board. In addition, a Supervisory Council may be formed within a SIA.

The Shareholders’ Meeting is the highest management body of a SIA. The Shareholders’ Meeting must be convened at least once a year in order to approve the annual report, decide on distribution of profits, and elect an auditor. Other competences of the Shareholders’ Meeting include amending the statutes; election of the members of the Board and the Council; an increase or decrease of the founding capital; etc.

The Management Board is the managing institution of a SIA, which directs and represents the SIA. The Management Board may be comprised of one or several members. According to the Latvian Commercial Law, at least half of the members of the Management Board must be persons with permanent residency in Latvia.

According to the Latvian "Law on Annual Accounts", after each financial year a SIA must carry out an audit if two of the following conditions are fulfilled:

1. 1)Total balance of theis 100, 000 LVL;
2. 2)Turnover of the company during the financial year was at least 200, 000 LVL;
3. 3)The number of employees is at least 25.

III. Founding of a Private Limited Liability Company in Latvia

A) Actions and documents required for establishment of a SIA

In order to establish a SIA the founders have to perform the following actions:

1. 1)draft and sign the founding documents (the Founding Agreement and the Statutes);
2. 2)set up the management bodies and appoint an auditor;
3. 3)pay the founding capital, arrange the transfer of the money to the bank account and receive the bank receipt confirming the payment;
4. 4)arrange the appraisal of material assets (if material assets are being contributed to the company);
5. 5)pay the State fees for registration in the Enterprise Register and publication in the State Gazette;
6. 6)file an application with the Enterprise Register.

The Founding Agreement must be signed by all the founders of a SIA. The signatures must be notarized before a sworn notary. If the signing of the Founding Agreement takes place abroad the signed Founding Agreement has to be duly legalized, in some cases with an “apostille” attached to it, to be valid in Latvia.

The Founding Agreement of a SIA must include the following information:

1. 1)Information regarding the founders (names, personal codes and addresses of individuals; names, registration codes, legal addresses of legal persons and data regarding their representatives who sign the agreement in their name);
2. 2)Name of the company;
3. 3)Amount of the founding capital, the number of shares and their nominal value;
4. 4)Amount of the founding capital to be paid by each founder, process and time-frame for payment;
5. 5)Amount of shares of each founder;
6. 6)Amount of shares and their nominal value which shall be paid for by material contributions (if any);
7. 7)Amount of expenses which may be used for company establishment and the process of their payment;
8. 8)Any special obligations, rights or priorities given to any person who took part in the founding of the company;
9. 9)Names, personal codes and addresses of the members of the Management Board;

10) Names, personal codes and addresses of the members of the Council (if the Council is formed by a SIA);

11) Name, personal code and address of an auditor;

12) Any other details that are considered to be material by founders and which are not in conflict with Latvian legislation.

In addition to the Founding Agreement the founders must also draft and confirm the Statutes (Articles of Association) of the Company. The Statutes must include, among other things, the name of the Company; the ways of business activities; the term of operation. The Statutes are signed by all the founders with notarization being required by law.

The founders must open a bank account in the name of the newly-founded company into which monetary contributions must be made. As noted above, the minimum founding capital for a SIA is 2, 000 LVL (€ 3, 067 Euros). According to Latvian legislation, 50 % of the founding capital must be transferred to the new Company’s account before the application for registration is filed with the Enterprise Register. The other half must be paid within one year from the day when the Company is registered in the Enterprise Register.

B) Registration of the Company

The founders of the new Company, or their authorized persons, must submit an application for the new Company’s registration to the Latvian Enterprise Register within six months after signing the Founding Agreement. The application is submitted on an official form provided by the Enterprise Register.

The following documents must be attached to the application to register a SIA at the Enterprise Register:

1. 1)The Founding Agreement;
2. 2)The Statutes;
3. 3)A note from a bank, confirming depositing of the defined share capital of the new Company;
4. 4)The written consent of every member of the Management Board to serve on the Board;
5. 5)The written consent of every member of the Council to serve on the Council (if the Council is formed);
6. 6)Notarized samples of signatures of every member of the Management Board;
7. 7)The Management Board’s declaration regarding the legal address of the Company;
8. 8)Bank receipts confirming the payment of the State duty and a fee for publication.

Depending of the country of origin of a document, and whether or not Latvia has entered into an agreement on judicial assistance with that country, foreign documents must be certified by “apostille” or duly legalized. All original documents must be signed and translated into Latvian. Translation may be performed in Latvia.

IV. State Fees and Time-Frame for Establishing a SIA in Latvia

The time frame for the establishment of a SIA depends on the amount of the State Fees the applicant/founders want to pay.

Below are the State fees and the time frame for registration of a Latvian limited liability company:

2 days registration - 300 Lats in State fees (approximately € 460 Euros)

4 days registration - 200 Lats in State fees (approximately € 307 Euros)

2 weeks registration - 100 Lats in State fees (approximately € 154 Euros)

In addition, a fee of 24 Lats (€ 37) must be paid for publication in the State Gazette regarding the new Company’s establishment

Expenses for notarization of documents normally do not exceed 60 Lats (€ 92) depending on the number of founders and members of the Management Board.