SMP

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Latvia

Typical legal form for start-ups

sabiedrība ar ierobežotu atbildību (SIA)

Brief information

Latvian start-ups usually choose the legal form of the SIA. It offers the advantages of an individual legal personality, limited shareholder liability, flexible corporate governance and a minimum share capital of only EUR 2,800. Also, its popularity contributes to its spread. The SIA is similar to the German GmbH.

If the SIA has a Supervisory Board, an investor can participate in it. He/She can also in principle accept an observer seat, whereby the contractual structure is decisive in the individual case. The observer may not exercise any influence on the management decisions.

The Management Board (valde) manages the SIA. In addition, a Supervisory Board (padomi) can be set up as an option. The latter is responsible for supervising the Management Board, which would otherwise be the responsibility of the shareholders' meeting.

If the SIA has a Supervisory Board, an investor can participate in it, as the supervisory duties are strictly separated from the management duties. He/She can also in principle accept an observer seat, whereby the contractual structure is decisive in the individual case. The observer may not exercise any influence on the management decisions.
PE/VC Funds may not participate in the Management Board.

Other legal form

akciju sabiedrība (AS)

Brief information

A conversion to an AS is usually carried out for the purpose of an IPO or for tax reasons. The AS is similar to the German stock corporation and is slightly different from the SIA in that it has a higher minimum share capital and mandatory dualistic corporate governance.

A PE/VC Fund may participate in the Supervisory Board of the AS. In addition, the investment may, subject to certain contractual conditions, be supervised by granting an observer seat status.

The AS has a compulsory dualistic organisation. In all cases a Supervisory Board (padomi) must be established next to the Management Board (valde).
In addition, an observer seat status can be granted to investors in both bodies by contract. The observer may attend meetings of the bodies but shall not have the right to vote.

A PE/VC Fund may participate in the Supervisory Board of the AS, as the supervisory duties are strictly separated from the management duties. In principle an observer seat can be accepted, whereby the contractual structure is decisive in the individual case. The observer may not exercise any influence on the management decisions.
PE/VC Funds may not participate in the Board of Directors.

The information in our toolbox provides managers of private equity or venture capital funds with an initial overview of certain framework conditions in the respective country. It does not provide advice on the law of any country, neither does it substitute such advice. Before taking over a board seat in a portfolio company, it is at all times necessary to seek expert advice. Our team is happy to assist you with all questions at any time.

In collaboration with: Sorainen