Registration of ultimate beneficial owners (UBOs) in Latvia has, over recent years, evolved from a formality into one of the key elements of corporate transparency oversight. Whereas companies previously enjoyed a degree of flexibility in disclosing their ultimate owners, the Enterprise Register and other public authorities now require information that is as precise and verifiable as possible.
The reason is straightforward: combating money laundering, terrorist financing, and corporate abuse has become a priority for both Latvia and the EU as a whole. As a result, requirements are tightening and businesses must adapt accordingly.
As recently as 2021, the situation looked different. It was permissible to file a declaration with the Enterprise Register stating that a beneficial owner could not be identified if:
- the shares in the company were distributed among four participants in such a way that none formally reached the 25% threshold, or exactly reached but did not exceed it;
- the ownership structure was complex but without a clearly dominant participant.
This position was considered acceptable: if no one holds 25% or more, there is no beneficial owner.
Today this rule no longer applies.
The current government position is clear: where shares are not listed on a stock exchange, a commercial entity always has a beneficial owner. Even where no participant’s share reaches the 25% threshold of the registered capital, the state proceeds on the assumption that someone may exercise control through participation in an executive body, or exert actual influence over other participants, or hold arrangements with other participants. Commercial entities are expected to identify and register the person who genuinely influences the making of key decisions.
The next significant step in tightening the rules concerns restrictions on real property transactions. For several years now, a rule has been in force under which a foreign commercial entity may not acquire real property in Latvia unless its beneficial owner has been registered with the Enterprise Register. This applies to companies from both third countries and EU member states. Compliance with this rule is monitored by notaries approached for the preparation of applications to consolidate title to the property being acquired, as well as by land registry judges when registering such transactions. In this way, the state eliminates the possibility of concealed property ownership through opaque structures.
Today, the absence of a registered beneficial owner effectively paralyses a company’s operations: banks will decline to provide services or may freeze the account altogether. Moreover, the State Revenue Service, in the course of an audit, assesses whether a beneficial owner has been registered and will flag the absence of such registration as a violation.
Since 2022, the possibility of concealing beneficiary data in cases where there is reason to believe that disclosing this information would compromise the beneficiary’s security has been discussed from time to time in Latvia. This was prompted by a decision of the European Court of Justice, in which the court considered whether disclosing a beneficiary’s personal data was contrary to Articles 7 and 8 of the Charter of Fundamental Rights of the European Union.
According to Article 7 of the Charter, everyone has the right to the inviolability of their private life, and according to Article 8, everyone has the right to the protection of their personal data. Initially, the court’s decision found a violation of these articles of the Charter, but upon further analysis, the court found that the restrictions on the rights specified in the Charter are established on the principles of legality, and that the prevention of money laundering and terrorist financing, for which beneficiary data is disclosed, is of greater importance to society and justifies the violation of Articles 7 and 8 of the Charter.
This suggests that the demands for transparency in the structure of any legal entity, including foundations and trusts, will only increase.
Law firm Inlatplus is ready to provide all types of legal services in the field of corporate law, including services related to the registration, liquidation, and reorganisation of companies in Latvia, amendments to founding documents, registration of transactions involving the alienation or pledge of shares and stock, changes to the board of directors, and any other processes required by the client.
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