When a Latvian Company Cannot Pay: Insolvency, and the Duty to File

Insolvency is not a decision a founder makes when the money runs out. It is a duty that starts on a date the statute picks, and the commonest expensive mistake is trading past that date while looking for a way out.

Debts overdue longer than 2 months are one of the statutory signs. Once a sign exists, the board must file without delay. A creditor owed more than EUR 4,268 can start the process instead, and an application costs a deposit of EUR 1,560 before anything else.

This guide covers what happens after that: who takes over, what creditors have to do and by when, what the process costs, the restructuring route that is not insolvency, and where a director's own money enters the picture.

This states the rules with a link to each. It is written for a founder trying to understand a process, not to run one. Insolvency is the point at which a page stops being enough: if your company is at or near a statutory sign, the useful next step is an insolvency adviser. The liquidation guide covers closing a company that can pay its debts, which is a different thing entirely.

What Happens When a Latvian Company Cannot Pay Its Debts?

The company stops running itself. A court proclaims insolvency, appoints an administrator, and the administrator takes the property into their management, sells it, and pays creditors in the order the law sets. The board's powers end at that point rather than continuing alongside.

The Insolvency Law frames a company insolvency as a set of legal measures for covering creditors' claims out of the debtor's property. That framing is the thing to hold onto: the process exists for the creditors, not to rescue the company. The route that exists to rescue the company is legal protection proceedings, and it is a different application.

Three things follow from a proclamation that founders consistently underestimate.

• Control transfers. The administrator takes the debtor's property into their management, including third-party property the company merely holds.
• The register says so. The proclamation is entered in the insolvency register, which is public, and the date of that entry starts the clock for creditors.
• Past transactions become reviewable. The administrator recovers debts owed to the company and pursues other property, which includes looking backwards at what left the company before the proclamation.

When Must a Latvian Board File for Insolvency?

Without delay, once a statutory sign of insolvency exists. Debts overdue by more than 2 months are one of those signs. The duty belongs to the board rather than the shareholders, and it is the criterion a director actually controls.

This is the part with personal consequences, and it is set out in full in the company registration guide, alongside the five conditions under which the State Revenue Service can pursue a board member for the company's unpaid tax. One of those five is precisely the failure to file when the duty arose.

The practical reading is unkind but simple. Trading on past the sign, in the hope of a contract that closes next month, is the decision that converts a company's problem into the director's problem. Filing on time is not an admission of failure; it is the step that keeps the failure inside the company.

What Does It Cost to File for Insolvency in Latvia?

An application for a company insolvency must carry a deposit of 2 minimum monthly wages, currently EUR 1,560, paid into an account of the Insolvency Control Service before the application is made. The deposit exists to cover the costs of the process where the company's own property does not.

That is the entry price, not the cost of the process. The administrator's remuneration and the costs of realising the property come out of the estate, which is the reason a company with nothing left is a harder case than a company with assets to sell.

It also answers a question founders ask in the wrong order. An empty company cannot simply be abandoned into insolvency for free: somebody has to fund the deposit. Where nobody does, what usually happens instead is the slow route the register takes with a company that stops filing.

Who Can File an Insolvency Application Against Your Company?

A creditor can, once the company has failed to settle a debt above EUR 4,268 and has been warned. The debtor company can file on itself, and must where a statutory sign exists. The threshold is specific to limited companies and joint stock companies.

The warning matters. A creditor does not move straight from an unpaid invoice to an insolvency application; the law puts a notice step in between, which is also the last comfortable moment to settle. From the creditor's side, the guide on getting paid covers the cheaper routes that come first, and insolvency is deliberately the end of that road rather than a step on it.

Treat a warning as the serious document it is. It is the point where the cost of doing nothing stops being interest and starts being the company.

How Long Do Creditors Have to Submit Claims?

1 month from the day the insolvency register records the proclamation. Claims go to the administrator rather than to the court or the company, and the period runs from the register entry rather than from the day a creditor happens to hear about it.

A late claim is not automatically lost, but it moves into a worse position and the law sets a final cut-off after which it cannot be brought at all. The asymmetry is the point: the register entry is public, and a creditor who does not watch for it carries the consequence.

For a founder this cuts both ways. If a customer of yours goes under, the clock is running on you from a date nobody will tell you about personally.

What Does the Administrator Actually Do?

They replace the board. The administrator takes the company's property into management, draws up its balance sheet, receives and verifies creditors' claims, recovers debts owed to the company, and reports to creditors and to the Insolvency Control Service on a statutory timetable.

Two of those duties deserve a founder's attention before a proclamation rather than after.

• Verifying claims. The administrator registers and checks each claim, which means the company's records become the evidence. Poor records do not make debts disappear; they make the process longer and more expensive out of an estate that is already short.
• Recovering property. The duty to recover debts and pursue other property is what makes pre-insolvency transactions worth thinking about carefully. Moving assets out ahead of a filing is the behaviour the process is built to reverse.

Is There an Alternative to Insolvency in Latvia?

Yes: legal protection proceedings, tiesiskās aizsardzības process, which is a restructuring route rather than a wind-up. The company proposes a plan of measures, agrees it with the required majority of creditors, and keeps trading under supervision instead of handing everything to an administrator.

It is a different application under the same law, and it runs from the day the court initiates the case to the day it decides to end it. Like an insolvency application, it requires the deposit to be paid, though the company can agree with creditors that they fund it instead.

The reason it belongs in this guide is timing. Restructuring is an option for a company that still has something to restructure, and the window for it closes as the statutory signs of insolvency accumulate. A founder who waits until the duty to file has crystallised has usually waited past this door as well.

What Does Insolvency Mean for the Founder Personally?

Limited liability still limits the shareholder. It does not limit the director, and in a small SIA those are the same person. Claims against a board member lapse 5 years after the loss was caused, running from the loss rather than from its discovery.

The exposure is not automatic and it is not common. It concentrates in a few behaviours: not filing when the duty arose, disposing of assets once recovery had begun, and failing to keep the records the administrator will ask for. Each is a decision rather than an accident.

Resigning from the board does not reset the clock, and a director who leaves before a filing does not leave the period behind them. The liability section in the registration guide sets out the standard of care and who has to prove it, which runs the opposite way to most people's intuition.

How Is Insolvency Different From Liquidation?

Liquidation is for a company that can pay its debts and whose owners have decided to stop. Insolvency is for a company that cannot, and control passes to an administrator rather than to a liquidator the shareholders chose. The owners keep the timetable in one and lose it in the other.

The two meet at one point worth knowing. A voluntary liquidation that discovers the assets will not cover the debts does not get to continue: the liquidator must file for insolvency instead. A liquidation is not a way to choose which creditors get paid.

Frequently Asked Questions

How overdue must a debt be before a Latvian company is insolvent?

More than 2 months is one of the statutory signs in the Insolvency Law. It is a sign rather than the only one, and once any sign exists the board's duty to file arises without delay. The duty is what matters legally, not whether the founder believes a rescue is still possible.

How much does an insolvency application cost in Latvia?

The application must carry a deposit of 2 minimum monthly wages, currently EUR 1,560, paid to the Insolvency Control Service. That is the entry price only. The administrator's fee and the costs of realising the company's property come out of the estate, which is why an empty company is the harder case rather than the easier one.

Can a creditor force a Latvian company into insolvency?

Yes, where the company has failed to settle a debt above EUR 4,268 and has been warned first. The threshold applies to limited companies and joint stock companies. The warning step is the last practical moment to settle before the application itself becomes the problem.

Does a founder lose personal money when their SIA goes insolvent?

Usually not. Limited liability protects the shareholder, but not the director, and in a small company they are the same person. Exposure concentrates in not filing when the duty arose and in what left the company beforehand. Claims against a board member lapse 5 years after the loss.

What is the difference between insolvency and legal protection proceedings?

Insolvency winds the company up for the creditors' benefit under an administrator. Legal protection proceedings keep it trading under a plan agreed with creditors and supervised. The second is only open to a company that still has something to restructure, so the choice between them closes as the statutory signs accumulate.

Sources

• Insolvency Law, for the statutory signs, the creditor threshold and warning, the deposit in section 62, the administrator's duties, the period for submitting creditors' claims in section 73, and legal protection proceedings.
• Commercial Law, for the limitation period on claims against a board member.
• Regulations on the minimum monthly wage, which the deposit is calculated from.