Company restructuring in Latvia
The process of company restructuring
Company restructuring process:
- In compliance with the Article 357 of the Commercial Law, a draft decision on restructuring is prepared containing the information referred to in the Paragraph 2 of the Article 338 of the Commercial Law, also indicating the type of the acquiring company. The decision is then supplemented with a draft of the articles of association of the acquiring company or partnership agreement of this company (if the acquiring company is a partnership).
- A notice of reorganisation is submitted to the Register of Enterprises. The notice is supplemented with the draft decision and draft articles of association or partnership agreement of the acquiring company as well as with a receipt for payment of the state fee (LVL 10) and receipt confirming the payment for registration announcement in the official gazette “Latvijas Vēstnesis” (LVL 8).
- The company may choose any of the auditors included in the approved list of the Commercial Register, except for cases when the examination by an auditor is not necessary. The application is supplemented with the minutes of the company’s shareholder meeting together with the decision on appointment of an auditor. The main responsibilities of an auditor are the following: 1) to examine the draft reorganisation agreement (decision) and 2) to evaluate whether the property is sufficient for formation of the equity capital, if the acquiring company is a capital company. An auditor may not examine the draft decision, if it is agreed on by all shareholders of a limited liability company to be restructured or by all members of a partnership to be restructured. If a limited liability company is restructured to become a joint stock company or vice versa not changing the equity capital the evaluation whether the property is sufficient for formation of the equity capital, namely, the auditor’s opinion, is not necessary.
- A reorganisation prospectus is drafted in compliance with the Article 339 of the Commercial Law. A prospectus may not be drafted: 1) a limited liability company involved in reorganisation if it is agreed on by all shareholders; 2) if all members of a partnership are authorised to manage the company or agree that a prospectus is not necessary.
- After the auditor has carried out the examination (if it was mandatory) and shareholders (members) of the company have got acquainted with the reorganisation documents a decision on reorganisation is made according to the provisions of the Article 343 of the Commercial Law and the general procedure determining the decision-making process of such companies. At the same time the articles of association or partnership agreement of the acquiring company is approved. If the acquiring company is a limited liability company or a joint stock company, a council, board and an auditor must be appointed provided that it is necessary in compliance with the articles of association or the law.
- Also specific measures for protection of creditors are in place – 15 days after the decision is made the company to be restructured notifies this fact to creditors which have had claim rights against the company as well as it publishes an announcement in the official gazette “Latvijas Vēstnesis” in compliance with the Article 345 of the Commercial Law. If a capital company is restructured to become a partnership, creditors are not entitled to request the guarantee envisaged by the Paragraph 3 of the Article 345 of the Commercial Law.
- At least 3 months after the day of publishing the announcement a company in compliance with the Article 347 of the Commercial Law submits to the Register of Enterprises an application in order to make an entry concerning the reorganisation as well as registration of the acquiring (reorganised) company in the Commercial Register.