Exploring the recent changes in Latvian Commercial Law regarding company incorporation procedure in Latvia as of 2023. Detailed explanation on the procedure how to register/incorporate company in Latvia.
Changes in Company Incorporation Procedure in Latvia: 2023 Update
Since 1st July 2023, there have been significant changes in the Latvian Commercial Law regarding the incorporation procedure of Companies in Latvia.
Before the law change, it was possible to incorporate a low-limited liability company in Latvia without depositing sharecapital in company's bank account, but rather to simply attest that the capital has been deposited in cash in the company's treasury.
The situation has changed, and this article will explore the recent changes in law and the current procedure on how to incorporate company in Latvia.
Last year, the draft law "Amendments to the Commercial Law" was drafted and entered into force on July 1, 2023.
1. Foundation of a capital company
In accordance with the requirements of the Commercial Law, the amount of the equity capital of a corporation to be established is determined by the founders and included in the contract of incorporation.
The total amount of the share capital is indicated in establishment decision, the share capital to be paid up until the registration of the company in the Register of Enterprises, as well as the amount of the share capital signed by each founder and payable until registration. Information on the procedure and terms of payment of the share capital is also indicated.
Prior to the amendments to the Commercial Law, when submitting an application to the Enterprise Register for the establishment of a company, the share capital had to be fully signed, but not fully paid. The remaining part of the share capital shall be paid for within the term specified in the establishment decision, but not later than within a year from the date of entry of the LLC in the Commercial Register or not later than within a year from the date of signing the agreement on the establishment of the joint stock company.
The amendment unifies the procedure for the payment of the share capital to all capital companies, providing that all capital companies must have fully paid-up share capital until the submission of the application for registration to the Enterprise Register. As before, the authorized capital of the company to be founded will be agreed by the founders, indicating it in the establishment decision. However, in the future, the terms of payment of the share capital will have to be specified in the establishment decision so that the share capital is fully signed and paid up by the time the application for the establishment of the company is submitted to the Register of Enterprises.
According to the transitional provisions included in the draft law, if, with the entry into force of the new regulation on the payment of share capital, a newly established company is entered in the commercial register with partially paid-up share capital, the payment of its share capital will have to be made within the time period specified in the memorandum of association. After the expiration of this period, the company will have to submit a notification to the Register of Enterprises on the payment of the share capital and the current register of participants.
2. Payment of share capital in the account
Prior to the amendments, the Commercial Law stipulated that the payment of the share capital with a cash contribution must be made by including the corresponding amount of money in a bank account. The new amendments provide that the founders will be obliged to open an account with a payment institution and deposit into it the funds necessary for the payment of the share capital.
The opening of a payment account as a payment service may be provided not only by credit institutions but also by electronic money institutions, payment institutions as well as payment institutions licensed in a Member State.
If you have any questions about the company incorporation in Latvia, or would like to receive a professional Latvian corporate lawyer's consultation, don't hesitate to book a meeting with us and we would be delighted to consult you and provide legal assistance with company incorporation in Latvia.