Approval and Submission of Annual Reports (COVID-19 extension)

24.05.2021 Approval and Submission of Annual Reports (COVID-19 extension)

We would like to remind you that for companies whose financial reporting year coincides with the calendar year, the deadline for submitting the annual report to the State Revenue Service (SRS) is approaching.

Due Date

As a result of the spread of COVID-19 infection, the deadline for submission of the 2020 annual report has been extended, thus:

  • for small companies and micro-entities, the annual report for 2020 shall be submitted by 31 July 2021, and
  • for medium-sized, large, and group parent companies – by 31 October 2021

(Article 23(1) of the Law on the Suppression of Consequences of the Spread of COVID-19 Infection).

A micro-entity is a small undertaking which on the balance sheet date does not exceed at least two of the below limit values of the criteria:

  • 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 balance sheet date does not exceed at least two of the below limit values of the criteria:

  • 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 limit values of the criteria:

  • 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 limit values of the criteria:

  • balance sheet total – EUR 20,000,000;
  • net turnover – EUR 40,000,000;
  • average number of employees during the reporting year – 250.

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 also includes 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 no group contract has been 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.

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 the right to vote 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) holding the right to vote 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).

Small and micro-entities must approve the annual report at the shareholder or stockholder meeting by 30 June 2021, and medium, large and group parent companies – by 30 September 2021 (Article 97(1) of the Law on the Annual Financial Statements and Consolidated Financial Statements and Article 23(1) of the Law on the Suppression of Consequences of the Spread of COVID-19 Infection).

The following documents shall be attached to the notice (Article 174(4), Article 180 of the Commercial Law):

  • annual report;
  • auditor’s opinion, if audit of the company is mandatory in accordance with the law or provided for in 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.

Although shareholders (stakeholders) may be notified of the opportunity to inspect the above documents in person instead of dispatch of the documents, it would not be recommended during the spread of COVID-19 infection (Article 214.2(7) of the Commercial Law).

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).

When organizing an on-site meeting, the company shall consider and ensure compliance with the requirements for limiting the spread of COVID-19 infection.

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) of the Commercial Law).

The annual report shall be 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 must be submitted to the SRS no later than 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).

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, last name, and position of the management board members (including those who left office during the reporting year);
  • if a supervisory board has been established, name, last name, 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 annual report document (it may be one or several, as indicated above) shall be signed by the management board or a management board member authorized by it (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 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 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 95(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 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.

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 allowed also 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 19 of the law On Accounting, Article 16.1(2) of the Law on Administrative Liability).