Re-domiciliation to Latvia of a company registered in other European country
Disregarding the tightened company formation and bank account opening procedures that had been implemented in Latvia, it still represents several benefits for corporate entities for doing of business, including the geographical positioning, qualified labour, and educational system, as well as transparent taxation structure for foreign investors.
For the implementation of an investment decision towards Latvia the European Union regulations already provide not only the opportunity to establish a new company but also under certain conditions an option to move the headquarters to Latvia, for example, by re-domiciling the place of registration (registered address), by moving the headquarters of a foreign entity or by merging other entities into a Latvian company.
Still rather uncommon, the formation of a European company (Societas Europaea, hereafter “SE”) is one of the solutions for re-domiciliation purposes between the European Union countries without pursing winding-up of entity and without formation of a new company in the country of destination. One of the useful methods of moving assets in business is cross-border reorganization involving SE without the liquidation process of the merging entity. SE may be created by merger of joint-stock companies, by creation of a controlling entity as SE if it had a subsidiary in another EU country. Several companies have already utilized the formation of SE for their strategic business needs, such as the merger of life insurance sector of SEB, reorganization of ERGO group of insurance companies with registration of SE in Estonia with branches in Latvia and Lithuania, or Capitalia SE by merging its Baltic operations and selecting Latvia as its country of domicile.
If the SE format is not available, the complexity of re-domiciliation of registration and its availability depends on the legislative requirements of the country from which the entity has to be relocated (the state of origin). Latvian laws and regulations are not discriminatory against any particular jurisdiction of the state of origin from where the company could be re-domiciled. In the most of cases, the restrictions are based in the corporate laws of the state of origin as a result of which in order for the company to be re-domiciled to Latvia the company had to undergo liquidation process in the former jurisdiction followed by a new company registration in Latvia, or by transfer of assets to an existing Latvian company. However, if the country of origin permits cross-border reorganization without winding-up procedures or is in the process of legislating in this direction, it could be successfully registered in Latvia. The most important legal criterion for re-domiciliation is preservation and complete transfer of all rights and obligations of the legal entity, and the state of origin is responsible to ensure that the rights and legitimate interests of creditors and other entitled persons are fully respected. Following the filing of application to re-domicile a company the state of origin issues a pre-conversion certificate, subject to fulfillment of all mandatory conditions, and this document serves as evidence for the Latvian company registration authority that the host country may register a new re-domiciled entity. Additionally, the application to the Latvian registration authority should contain an expert opinion addressing the sufficiency of assets of the re-domiciled company. Registration entry is made with concurrent reference to the predecessor in law – the re-domiciled entity of the state of origin.