The preparation of the annual report must be started timely in order to complete all the necessary actions on time:
1) preparation of the annual report,
2) signing – additional time may be required if the annual report is signed in paper format, but the members of the company's management board are located in different countries,
3) report of the supervisory board, if the company has a supervisory board,
4) auditor's opinion, if the audit is required according to the law or the articles of association of the company,
5) convening of the meeting of shareholders – at least 14 days for limited liability companies and at least 30 days for joint stock companies, unless all shareholders with voting rights participate in the meeting with a shorter convening term,
6) approval,
7) submission to the SRS.
Due Date
The deadline for submission of the annual report for the year 2022 is:
- for small companies and micro-entities – by 31 May 2023, and
- for medium-sized, large, and group parent companies – by 31 July 2023
(Article 97(1) of the Law on the Annual Financial Statements and Consolidated Financial Statements).
A micro-entity is a small undertaking which on the date of balance sheet does not exceed at least two of the below threshold values:
- balance sheet total – EUR 350,000;
- net turnover – EUR 700,000;
- average number of employees during the reporting year – 10.
A small company is an undertaking which on the date of balance sheet does not exceed at least two of the below threshold values:
- balance sheet total – EUR 4,000,000;
- net turnover – EUR 8,000,000;
- average number of employees during the reporting year – 50.
A medium-sized company is an undertaking which on the balance sheet date does not exceed at least two of the below threshold values:
- balance sheet total – EUR 20,000,000;
- net turnover – EUR 40,000,000;
- average number of employees during the reporting year – 250.
A large company is an undertaking which on the balance sheet date exceeds at least two of the below threshold values:
- balance sheet total – EUR 20,000,000;
- net turnover – EUR 40,000,000;
- average number of employees during the reporting year – 250.
(Paragraph 1, 2, 3 and 4 of the Article 5 of the Law on the Annual Financial Statements and Consolidated Financial Statements).
Documents to Be Submitted
The annual report consists of the following documents (Article 8(2), Article 9(1), Article 52, Article 55 of the Law on the Annual Financial Statements and Consolidated Financial Statements):
- balance sheet;
- income statement;
- notes to the financial statements with explanations regarding the information specified in other sections of the financial statements;
- report of the company's management regarding the company's financial position, results, risks, future development, and other information specified by law.
For medium-sized and large companies, the annual report includes also a cash flow statement and a statement of changes in equity (Article 8(2), Article 9(2) of the Law on the Annual Financial Statements and Consolidated Financial Statements).
Micro-entities need not prepare a management report, extremely small micro-entities – also the notes to the financial statements (Articles 56, 57, 58 of the Law on the Annual Financial Statements and Consolidated Financial Statements).
In the case of a group of companies, if there is no group contract concluded, the dependent companies must prepare and approve a report on dependency together with the annual report (Article 30(1) of the Group of Companies Law). Such report shall be submitted to the Register of Enterprises (Article 31(8) of the Group of Companies Law).
The annual report with all its components shall be prepared in the Latvian language.
Compilation
The annual report is prepared by the management board of the company (with the help of an accountant) (Article 174 (1) of the Commercial Law).
If the company has a council, the board sends the annual report to the council, which prepares a report on the annual report (Article 174 (1) and Article 175 of the Commercial Law).
The board of medium-sized and large companies, the parent companies of the group, the companies whose securities are listed on the regulated market and the companies whose articles of association require audit, shall send the annual report to the auditor, who examines it and prepares an opinion thereon (Article 174 (1), Article 176 of the Commercial Law, Article 91 of the Law on the Annual Financial Statements and Consolidated Financial Statements).
An auditor's report is also required for small companies whose performance exceeds at least two of the following criteria for two consecutive years:
- balance sheet total - 800,000 euros;
- net turnover - 1,600,000 euros;
- average number of employees in the reporting year - 50.
After receiving the report of the council and the auditor's opinion, the board sends the annual report to the participants (shareholders) for approval.
Content and Signature
The annual report may be prepared as one document, including all the above components, or as an aggregate of two documents (financial statement and management report), or as an aggregate of several documents consisting of separate component parts of the financial statement and management report (Article 94(1) of the Law on the Annual Financial Statements and Consolidated Financial Statements).
At least the following information must be specified at the beginning of each document (Article 94(2) of the Law on the Annual Financial Statements and Consolidated Financial Statements):
- the name (firm name) of the company;
- type (LLC, JSC, etc.)
- registered address;
- registration number;
- name, surname, and position of the management board members (including those who left office during the reporting year);
- if a supervisory board has been established, name, surname, and position of its members (including those who left office during the reporting year);
- partnerships must indicate the name, last name, personal identification number and address of the personally responsible and limited partners instead of the members of the management board and supervisory board.
Each document must contain a date and signature(s).
Each document of the annual report (it may be one or several, as indicated above) shall be signed by the management board or an authorized management board member (Article 95(1) of the Law on the Annual Financial Statements and Consolidated Financial Statements). A person who is not a management board member may not be authorized for this purpose. In the absence of such authorization, the documents must be signed by all the management board members. The annual report must also be signed by those management board members who do not agree with the statements in the annual report, if any, and they shall indicate their objections in a special note (Article 95(2) of the Law on the Annual Financial Statements and Consolidated Financial Statements).
Before signing of the annual report, please make sure that the term of office of the management board members has not expired and their right of representation is valid.
The annual report, if it is prepared as a single document, or only the financial statement, if it is prepared separately from the management report as one or several documents, must also be signed by the accountant responsible for the preparation of the annual report or by the outsourced accountant, who has entered into agreement regarding such service (Article 95(5) of the Law on the Annual Financial Statements and Consolidated Financial Statements).
Electronic Signature
The annual report may be prepared in paper format or electronically (Article 94(1) of the Law on the Annual Financial Statements and Consolidated Financial Statement). In the latter case, it shall be signed by affixing a secure electronic signature containing a time stamp.
If the document is signed in another Member State of the European Union, one of the qualified trust service providers must be selected for affixing the electronic signature. A list of such service providers can be found on the European Commission's website at:
https://esignature.ec.europa.eu/efda/tl-browser/#/screen/home
When choosing one of those service providers, please make sure that the service provider is also entitled to provide an electronic timestamp.
Approval
The management board of the company convenes a regular meeting of shareholders (stockholders) to approve the annual report, make a decision on profit distribution and elect an auditor.
If the entire share capital with voting rights is present at the meeting of shareholders (stockholders), such meeting may be convened immediately, and it may immediately adopt resolutions not included in the agenda if all shareholders (stockholders) with voting rights agree unanimously.
In other cases, the notice on the shareholder meeting of an LLC must be sent at least 2 weeks in advance, but on the stockholder meeting – at least 30 days in advance, unless otherwise provided in the articles of association (Articles 214 and 273 of the Commercial Law).
The following documents shall be attached to the notice convening the meeting of shareholders (Article 174(4), Article 180(2) of the Commercial Law):
- annual report;
- auditor’s opinion, if audit of the company is compulsory by law or required according to the articles of association;
- report of the supervisory board, if the company has a supervisory board;
- management board's proposal on the distribution of the profit, if there has been a profit.
Shareholder (stockholder) meetings may take place in person or by electronic means, including a part of the shareholders (stakeholders) can participate and vote electronically, while others on-site (Articles 2141 and 2771 of the Commercial Law).
If the meeting is at least partially held electronically, the management board shall determine the criteria according to which the identification of shareholders (stakeholders) will take place, as well as the process of the meeting. As the law does not specify specific types of identification and electronic means of communication, the choice of a specific technological solution (video and audio streaming, electronic identification applications) is at the discretion of the management board. It is permitted to identify a person during video communication by the person presenting an identification document, if the video is of good quality, the person's face and document are clearly visible (Cabinet Regulation No. 392 of 3 July 2018, Paragraph 10).
Shareholder (stockholder) may also cast his/her vote in writing, including through electronic means, prior to the meeting. In such case, the vote must be cast so that the vote is received by the company at least one day prior to the meeting (Article 2141(1) and 277.1(1) of the Commercial Law).
The annual report is approved if it has received more than half of the shareholders’ (stakeholders’) votes represented at the meeting unless otherwise provided by the articles of association (Articles 216(1) and 284(1) of the Commercial Law).
The annual report shall be submitted to the SRS not later than within one month after its approval, not exceeding the above-mentioned deadline (Article 97(1) of the Law on the Annual Financial Statements and Consolidated Financial Statements).
Submission to the SRS
The annual report may be submitted to the SRS only electronically, using the SRS Electronic Declaration System (EDS) (Article 97(1) of the Law on the Annual Financial Statements and Consolidated Financial Statements). Companies shall submit only a copy or electronic copy of the original annual report prepared in paper format or electronically in the following manner (Article 97 of the Law on the Annual Financial Statements and Consolidated Financial Statements and Cabinet Regulation No. 399 of 21 June 2016):
- financial statements – by filling in the relevant financial statement forms in the EDS;
- notes to the financial statements – by filling in the relevant form in the EDS, but it is also permitted to submit as an electronic copy of a paper document;
- auditor's opinion – as an electronic copy of a paper document;
- management report – if prepared in paper form, as an electronic copy, if prepared electronically, as an electronic document with all signatures.
Liability
If the annual report is not submitted by the specified due date, all the necessary components have not been attached to it or it does not otherwise comply with the requirements specified by law, the company will be subject to administrative liability. In such case, a warning or a fine of up to EUR 2,000 may be imposed on the company (Article 41 of the Accounting Law, Paragraph 2 of the Article 16.(1) of the Law on Administrative Liability).
