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Latvia

Merger

Updated 11/2010

Legal requirements

Company mergers are governed by the Commercial Law, the                                                    Law on Competition and the relevant Regulations of the Cabinet of Ministers. The Law on Competition provides for fines for illegal mergers, for which financial penalties may be imposed by the                                                  Competition Council. If the offender does not comply with the Competition Council's rules the offender becomes subject to the                                                         Latvian Code of Administrative Offences and in some cases subject to the                                                    Criminal Law.                                     

Types of merger

The                                                      Commercial Law of the Republic of Latvia provides that companies may merge by                                                             acquisition or                                                             fusion processes. The law qualifies these processes as                                                          reorganisation. In the event of a merger, the shareholders or members of the acquired company shall become                                                            shareholders of the acquiring company.                                           

Merger by acquisition

Acquisition is a process whereby the acquired company transfers all of its assets to                                                         another company.                                          

Merger by fusion

As a result of fusion the companies that have decided to merge transfer all of their assets to a                                                           newly incorporated company.                                           

Cross-border merger

A merger is considered to be a cross-border merger where                                                       at least one of the merging companies is                                                         registered in Latvia while the others are registered in the European Union or the European Economic Area.                                           

A merger                                                         shall not be considered as a cross-border merger where there is a company involved that intends                                                     to manage the collective capital investments of individuals in accordance with the principle of division of risk and whose share capital is redeemable on shareholder demand directly or indirectly from its own assets.                                               

Merger conditions

Before entering into one of the types of merger sanctioned by the Law On Competition, the merging companies must                                                       give notice to the Competition Council of the planned transaction where one of the following conditions applies:                                              

  • the total turnover of the companies involved was                                                       at least LVL 25 million   in the preceding year;                                          
  • the total market share of the companies involved in their particular market segment is                                                                       over 40%.                                                 

In the course of the merger the companies enter into a                                                             reorganisation agreement. This should be a written agreement.                                               

Each company involved in the                                                             reorganisation shall draw up a prospectus in writing where it states and explains:                                             

  • the terms of the draft agreement,
  • the legal and economic aspects of the reorganisation,
  • the share exchange ratio and the amount of premiums,
  • the methods used to determine the share exchange ratio and the amount of premiums, as well as problems arising from the use of these methods.

The                                                      draft agreement between the companies involved in the reorganisation                                                   shall be reviewed by an auditor appearing on the list approved by an office of the Commercial Register. Companies involved in the reorganisation may appoint a joint auditor.                                       

The auditor                                                      shall prepare a written opinion following examination of the draft agreement and shall submit it to the company. If the same auditor has been appointed for all the companies, he or she shall submit the opinion to all those companies.                                       

The board of directors of the acquired or dividing company                                                     has a duty to                                                    inform the general meeting and the acquiring company regarding all substantial changes in the material situation of the acquired or dividing company which have occurred up to the date of expiry of the powers of the board of directors or up to the time the reorganisation takes effect.                                          

                                                           Within fifteen days of the date on which the reorganisation resolution is adopted, each of the companies involved in the reorganisation shall give notice in writing to                                                      all of its known creditors who have claims against the company up to the date on which the reorganisation resolution is adopted.                                          

On the basis of a request from a shareholder or from a member of the executive or supervisory board of a company involved in the reorganisation, the                                                             court may declare the resolution regarding reorganisation as void, if it was taken in breach of the law, the company’s articles of association or a partnership agreement, and it is not possible to rectify these breaches or they are not rectified within the time period specified by the court.                                       

Each of the companies involved in the reorganisation shall,                                                      no earlier than three months after the day when the notice is published,                                                       submit an application to the office of the Commercial Register in order that the  reorganisation be recorded in the Commercial Register.                                         

Shareholders of the acquired, dividing or restructured company, who did not agree to the reorganisation, are entitled, within two months of the date on which the reorganisation takes effect, to request the                                                  acquiring company to redeem their shares for cash.                                     

                                                           Special provisions for cross-border mergers                                                           are contained in                                                                       Part XIX of the Commercial Law.                                                      

Buying an existing company, with an already established structure, can be a good way of expanding your business.

Administrative procedures

Registration

In the event of a merger, the                                                                acquired company                                                                     ceases to exist without being dissolved, whereas in the event of a merger involving the incorporation of a                                                                     new company registration takes place                                                               according to general procedures.                                                   

The new company must be registered with the                                                              Commercial Register. Traders are registered according to their location in the relevant local office of the Enterprise Register. You can find application                                                                         forms at branch offices and on the Enterprise Register website.                                                          

Taxpayer registration

Enterprises are registered as taxpayers in the                                                               Enterprise Register (UR) provided under the Law On the Enterprise Register. The Enterprise Register (UR) shall allocate a unified registration number to the legal person and issue a registration certificate, which also serves as a taxpayer certificate.                                                         

The Enterprise Register shall forward information electronically on the registered legal person to the                                                                  State Revenue Service (VID).                                                 

Legal persons who are                                                                        not required by law to register with the Enterprise Register, shall be registered as taxpayers with the VID.                                                           

Taxable persons in the sense of the Law on Value Added Tax shall be registered with the VID as prescribed by law.

Under                                                              Cabinet regulations   taxpayer registration deadlines are as follows:                                                  

  • advocates’ practices - within 10 days of the date of their establishment;
  • notarial practices - within 10 days of starting in practice;
  • the permanent establishments of foreign traders according to the location of their activities in Latvia - within 10 days of commencing activity in Latvia.

In order to register with the                                                                  local VID office the                                                              taxpayer must submit an application containing information about the taxpayer himself, the taxpayer’s bank accounts, the founders, officers who have the authority to sign documents; the nature of the taxpayer’s activities and the passport of the person submitting the application and that person’s authority to do so.                                                           

                                                                       The VID shall, within 10 days, examine the documents submitted by the taxpayer, register the taxpayer in the taxpayers’ register and issue the taxpayer registration certificate. The main enterprise shall receive the registration certificate of any of its subsidiary divisions.                                                       

Where registration has been                                                                 refused, the taxpayer may correct the documents and submit them                                                                   again for registration.                                                 

Help & advice

Help & advice

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