(Latvia, 2023) Significant New Opportunities and Obligations Prescribed by the Commercial Law Amendments

22.05.2023 (Latvia, 2023) Significant New Opportunities and Obligations Prescribed by the Commercial Law Amendments

On 1 June and 1 July 2023, significant amendments to the Commercial Law will enter into force. The most significant of them are as follows:


  1. The possibility to freely determine the distribution of dividends by amending the articles of association

The long-awaited opportunity to freely distribute dividends is here! Until now, dividends could only be distributed in proportion to the number of shares held by shareholders. An alternative was the creation of class shares with different dividend rights, such as non-voting preference shares. But from 1 June 2023, shareholders can determine any arrangements they prefer to distribute dividends in the company's articles of association. These arrangements will not need to be linked to classes of shares.

Thus, shareholders who, in addition to their initial contribution to the company's share capital, contribute to the development of the business in any other manner may receive correspondingly higher dividends.

Let your TGS Baltic representative know how you want to distribute dividends in your company, and we will assist you in implementing such dividend distribution.

  1. Time to reorganize much faster!

If you want to optimize your business by merging group companies or streamline your group's operations by separating individual businesses, now is the best time! As of 1 June 2023, the reorganization process will be significantly simplified and shortened. Cross-border reorganizations are also simplified, so you can easily organize your structure on a pan-European basis.

The reorganization can now be completed within 1-2 months instead of the minimum 3-4 months previously required. Companies involved in the reorganization will only have to make provisions for the claims of those creditors who have demonstrated that the reorganization would threaten the satisfaction of their claims. In addition, creditor claims should be secured only after the reorganization has been completed.

Take the opportunity to reorganize your business structure quickly and easily! Let your TGS Baltic contact know about the changes you want to make, and we will help you implement them easily and efficiently.

  1. Possibility to deposit the share capital of the company in an account opened with a payment institution

It will be permitted to pay the company’s share capital into an account opened with a payment institution (previously only into a bank account).

  1. Won't the currently registered information on beneficial owners prevent you from exercising your voting rights and receiving dividends?

Until now, only the management board of a company was responsible for identifying, registering, and updating the information on the company's beneficial owners. From 1 July 2023, the company's shareholders will be obliged to provide correct information to the company about the company's beneficial owner. If the company's management board has not registered the current information in the commercial register, the registration should be made by the shareholder itself.

Shareholders who have not provided the companies with the required information on the beneficial owner will not have voting rights and will not be paid dividends. The court can exclude such shareholders from the company, making their shares the company’s property.

To reduce your liability risk and prevent potential business complications, TGS Baltic will assist you in verifying and updating the registered information. Please get in touch with your TGS Baltic contact person!

  1. Obligation for joint stock companies to submit to the Enterprise Register the information on shareholders and to amend their articles of the association specifying the new form of shares

To reduce the risk of illegal transactions and ensure transparency in joint stock companies' activities, all joint stock companies will be required to submit information on their shareholders to the Enterprise Register.

The amendments also abolish the division of shares into registered and bearer shares and introduce the following new types of shares:

  • registered shares, which are entered in the register of shareholders kept by the management board of the company; or
  • dematerialized shares, recorded by the central depositary.

Accordingly, by 30 June 2024, the joint stock companies with registered shares must submit the register of shareholders to the Enterprise Register, and the companies with dematerialized shares – confirmation from the depository on recording of the stock and notices on shareholders who own more than 5% of the company’s stock.

If a joint-stock company fails to submit the required documents within the set time limit, the Enterprise Register may decide to terminate the company. In the event of shareholder inaction, the company shall be deleted from the commercial register, and its assets are automatically transferred to the State. Several hundred companies have already been wound up in this way during the last 3 years because they failed to submit information on their beneficial owners to the Enterprise Register by the set deadline.

By 1 July, 2026, all joint-stock companies must also make and register amendments to the articles of association determining the new type of shares.

To ensure the continuity of your business, send the list of shareholders of your company to your TGS Baltic contact, and we will assist you with organizing the necessary registrations. We recommend to start the process as soon as possible. If the company's shareholders and/or management board members are located abroad, it may take longer than expected to have the documents circulated and signed before a notary.

  1. Further regular obligation for joint stock companies to inform the Enterprise Register on changes in the shareholding structure.

In the case of registered shares, any changes to the shareholders’ register must be filed with the Enterprise Register.

In the case of dematerialized shares:

  • A shareholder must inform the company's management board of every 5% of the total number of shares in the company acquired or disposed of by the shareholder;
  • The Company shall notify the Enterprise Register of any changes in the composition of shareholders of +/- 5%;
  • Otherwise, the shareholder concerned will have no voting rights (except if the shares are on a regulated market).
  1. Reduction of the minimum share capital of a joint stock company, simplification of the convening of shareholder meetings, and electronic access to the documents to be considered at the meeting

The minimum share capital for joint stock companies is reduced from EUR 35,000 to EUR 25,000.

Simplified process of organizing a shareholder meeting – shorter notice period (21 days before the meeting) and an obligation for the company to make documents to be reviewed at the meeting available to shareholders electronically free of cost.

  1. Other Changes

It will not be required to provide information to the Enterprise Register on the place of residence of persons (e.g., founders, management board members, supervisory board members, auditors, liquidators), instead it will be possible to indicate another address where the person can be reached.

From 1 July 2023, all official notifications (e.g., on reduction of share capital, reorganization, dissolution, or liquidation) will be published on the website of the Enterprise Register: https://info.ur.gov.lv/ (the newspaper Latvijas Vēstnesis will no longer publish them).