A board of directors of the Latvian Ltd (SIA)
Company formation and accounting in Latvia
Last updated: 2015-11-24
What is a board of directors?
Who can and can not be a member of a board?
How to create a board of directors?
The powers and limitations for a board
Responsibilities of a board

What is a board of directors?
A board of directors is one of management institutions of a company and is the executive institution, which daily manages and represents the company.

Who can and can not be a member of a board?
Member of a board can be only capable natural person.
Person can not be a member of a board of particular company if the person is:
  • a member of a council of the same company,
  • the auditor of the same company,
  • a member of a board of directors of the ruling company of a group of companies,
  • a person who meets the restrictions specified in the articles of association (if the shareholders have decided to include certain restrictions in articles of associations),
  • a person that is debarred by a court decision to do certain or all types of commercial activities,
  • a person that is prohibited by a court decision to be a member of management institutions of companies.

How to create a board of directors?
By registering a limited liability company, the founders elect (appoint) the members of a board.
After registration, a board of directors is elected (appointed) by a meeting of shareholders (or the owner of the shares).
The minimum number of members of a board of directors is one. A board of directors is elected for an indefinite period, unless otherwise is stated in the articles of association.
Each member of a board makes a written consent to be a member of a board. The signature on the consent must be certified by a public notary, or official of the Register of Enterprises (in limited cases), or the consent must be signed by a secure electronic signature.
A board elects the chairman of the board. The chairman is chosen among the members of the board. The founders (shareholders) may state in articles of association that a chairman of the board is elected by a council.

The powers of a board and limitations for members of a board
Members of a board jointly manage the company. Each member is entitled to represent the company.
In the articles of association may be stated that each member has the rights individually to represent the company. If in the articles of association such rights are not prescribed then the rights to represent the company have only to all members of the board jointly. In the case of a jointly representation a board may authorize one or more members to enter into certain transactions or certain types of transactions.
Member of a board without the consent of a council (if the council is not created, without the consent of the shareholders) does not have the right to:
  • be a personally and indefinitely responsible partner (complementary) in a personal partnership.
  • in his (her) name or in the name of a third party, or for the benefit of himself (herself) or a third party to conclude contracts in the scope of commercial activities of the company,
  • be a member of a board of another company, which operates in the same scope of the business as the company (except if the two companies are a part of a group of companies).

Responsibilities of a board
All members of a board are jointly and severally liable for any losses incurred as a result of false information that is communicated to the company after the registration in the commercial register (part 2 of article 165 and 169).
Member of a board must perform his duties as an honest and careful owner. In the legislation there is no direct explanation of what it means. The phrase is mentioned in several other laws (e.g., Civil Law, Insolvency Law).
Analyzing legislation can make a conclusion that the members of a board are obliged to act carefully, accurately, laboriously, must avoid even small negligence.
It must be noted that a member of the board is obliged to prove that he acted as an honest and careful owner (an exception if the board acted in good faith according to a lawful decision of the shareholders).
Otherwise, member of the board is responsible personally (that is, with all the property).
From these provisions of the Commercial Law, can make a conclusion that it is more simply to avoid the situation where a member of the board is obliged to prove that has acted as an honest and careful owner. However, in practice there are not so many situations where for members of the board are applied such stringent requirements.
A meeting of shareholders may release members of a board from responsibility or make a decision on the conclusion of conciliation, but only regarding actually committed activity which resulted in damage to the company and if the is discovered in the meeting.
Starting from 1 January, 2015, if certain conditions are met, members of a board of directors are jointly and severally personally responsible for tax debts of a company (article 60 of the Law about taxes and duties as amended on 1 January, 2015).



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