Submission of Annual Reports and Other Registration Obligations

26.03.2024 Submission of Annual Reports and Other Registration Obligations

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.

Furthermore, joint stock companies have to apply for registration of various changes regarding the types of stocks and stockholders in the Enterprise Register of the Republic of Latvia until 30 June 2024.

  1. Approval and Submission of Annual Reports

The preparation of the annual report should be commenced early enough to allow for all the necessary steps:

1) preparation of the annual report,

2) signing – additional time may be required if the annual report is signed in paper format and the company's management board members are located in different countries,

3) preparation of the supervisory board report if the company has a supervisory board,

4) preparation of an auditor's opinion if an auditor's examination is required by the articles of association or by law,

5) convening a shareholder meeting – at least 14 days are required for limited liability companies and at least 21 days are required for joint stock companies, unless all voting shareholders (stockholders) participate in a meeting with a shorter convening period,

6) approval,

7) submission to the SRS.

 

Deadline

The deadline for submitting the annual report for 2023 is:

  • for small companies and micro enterprises - until 31 May 2024, and
  • for medium-sized, large and group parent companies - until 31 July 2024

(Article 97(1) of the Law on Annual Statements and Consolidated Annual Statements).

A micro-enterprise is an entity that does not exceed at least two of the following thresholds at the balance sheet date:

  • 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 entity that does not exceed at least two of the following thresholds at the balance sheet date:

  • 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 entity that does not exceed at least two of the following thresholds at the balance sheet date:

  • 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 entity that exceeds at least two of the following thresholds at the balance sheet date:

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

(Parts 1, 2, 3 and 4 of Article 5 of the Law on Annual Statements and Consolidated Annual 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 Annual Statements and Consolidated Annual 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 Annual Statements and Consolidated Annual Statements).

Micro-enterprises need not prepare a management report, extremelysmall micro-enterprises – also the notes to the financial statements (Articles 56, 57, 58 of the Law on Annual Statements and Consolidated Annual 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 Enterprise Register (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 company's management board (with the assistance of an accountant) (Article 174(1) of the Commercial Law).

If the company has a supervisory board, the management board sends the annual report to the supervisory board, which prepares a report on the annual report (Article 174(1), Article 175 of the Commercial Law).

The management board of medium-sized and large companies, parent companies of a group, companies whose securities are listed on a regulated market, and companies for which an auditor's examination is required by the articles of association, 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 Law on Annual Statements and Consolidated Annual Statements).

An auditor's opinion is also required for small companies whose performance exceeds at least two of the below criteria for two consecutive years:

  • balance sheet total – EUR 800,000;
  • net turnover – EUR 1,600,000;
  • average number of employees during the reporting year – 50.

After receiving the supervisory board's report and the auditor's opinion, the management board delivers the annual report to the shareholders (stockholders) for approval.

 

Content and Signature

The annual report may be prepared as a single document including all the components listed above, or as two documents (separate financial statements and management report), or by presenting the management report and each component of the financial statements as a separate document (Article 94(1) of the Law on Annual Statements and Consolidated Annual Statements). 

At least the following information shall be specified at the beginning of each document (Article 94(2) of the Law on Annual Statements and Consolidated Annual Statements):

  • the name of the company,
  • type (limited liability company, joint stock company, etc.)
  • registered address,
  • registration number,
  • first 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, first name, last name and position of its members (including those who left office during the reporting year);
  • partnerships shall indicate the first 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 shall 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 the management board (Article 95(1) of the Law on Annual Statements and Consolidated Annual 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 shall be signed by all management board members. The annual report shall 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 Annual Statements and Consolidated Annual 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, shall 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 Annual Statements and Consolidated Annual Statements).

 

Electronic Signature

The annual report may be prepared in paper format or electronically (Article 94(1) of the Law on Annual Statements and Consolidated Annual Statements). 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 entitled to provide a qualified electronic signature as well as an electronic timestamp.

 

Approval

The management board of the company convenes an ordinary meeting of shareholders (stockholders) to approve the annual report, make a decision on profit distribution and elect an auditor (Article 174(2) of the Commercial Law). Unless otherwise provided in the articles of association, the management board shall send the notice convening the meeting to shareholders (stockholders) to the contact addresses indicated in the register of shareholders (stockholders) of the company:

  • limited liability companies – at least 14 days before the meeting (Article 214(1) of the Commercial Law),
  • joint stock companies – at least 21 days before the meeting (Article 273(1) and Article 273(2) of the Commercial Law).

 

Annual Reports of Branches and Permanent Establishments

Branches and permanent establishments prepare and submit only a balance sheet, an income statement and a corporate income tax return (Article 4(12) of the Corporate Income Tax Law). These documents shall be submitted to the State Revenue Service by 30 April 2024 (Article 17(9) of the Corporate Income Tax Law).

 

  1. Other Compulsory Registrations

As the original classification of stocks in the Commercial Law has become obsolete over time (bearer stocks no longer fulfil their function, paper stocks are no longer issued), the historical classification of stocks has been replaced by new types of stocks as of 1 July 2023.

Accordingly, a company may have only one type of stocks, and they may be (Article 228(1) of the Commercial Law):

  • registered – listed in the register of stockholders kept by the company's management board; or
  • dematerialised – registered in the central securities depository.

In this respect, joint stock companies must perform the following obligations until 30 June 2024:

  • Companies holding both registered and bearer stocks must adopt and register amendments to the articles of association stipulating that thereafter all stocks will be either registered or dematerialised (Paragraph 66(1) of the Transitional Provisions of the Commercial Law). Companies holding only registered or bearer stocks may register amendments to their articles of association indicating the new type of stocks until 1 July 2026 (Paragraphs 75 and 76 of the Transitional Provisions of the Commercial Law);
  • All joint stock companies must submit information on stockholders to the Enterprise Register. Companies whose stocks are registered in the stockholder register must submit the stockholder register folio, while companies whose stocks are recorded in a depository submit information on the depository and the depository's confirmation of the recording of the stocks (Paragraph 66(2) and Paragraph 66(3) of the Transitional Provisions of the Commercial Law);
  • Companies having dematerialised stocks must submit stockholder notifications to the Enterprise Register for each acquisition of 5% of the company's stocks. Such notifications must also be submitted in the future for each change in the number of stocks of a stockholder for each subsequent increase or decrease of 5% of the total number of stocks of the company (Article 2363(5) and Paragraph 68 of the Transitional Provisions of the Commercial Law).

For convenience purposes, the above obligations can be combined and both the annual report and the amendments to the articles of association can be approved at the same meeting.

If you wish to reduce your risk of liability for irregularities in the preparation or approval of the annual report, or amend the articles of association and register the stockholder information in a proper and convenient manner, please do not hesitate to contact us!