Selling a Latvian Company: Share Deals, Consents, and the Tax on Your Exit

Most Latvian companies end rather than sell. The register shows far more strikings-off than exits, and a founder who does get an offer is usually doing this for the first time, against a buyer who is not. This guide sets out how a sale of a Latvian SIA actually works: the two routes, what a buyer can read about you before you tell them anything, whose permission you need, and what the state takes at the end.

This is the shape of a Latvian sale, not advice on yours. Terms, warranties and price are yours and your lawyer's; what is here is the law and the register, each linked to where it says so.

How Do You Sell a Latvian Company?

Two routes. Sell the shares, and the company changes owner with everything in it. Sell the business out of the company, and the buyer takes the assets and contracts while you keep the shell. A share sale runs on a purchase agreement, a joint notice to the company, an entry in the shareholder register, and a filing with the register.

The mechanics of moving shares, which are the same whether you are selling to a founder or to a buyer, are in the cap table guide. The short version is that the company records the transfer once the buyer and seller give it a joint notification confirming the transfer, or the original deed or a notarised copy of it, and the register entry carries the notarised signatures of both the seller and the buyer.

• Agree the deal. Price, what is being bought, warranties, and what happens to the money if something turns out to be untrue.
• Clear the consents. Pre-emption rights first, then anything in the articles, the shareholders' agreement, bank facilities and customer contracts.
• Clear the regulators, if any apply. Competition clearance and national security permission both have thresholds, below which nothing is needed.
• Complete. Sign, pay, hand over the company's books and access.
• File. The shareholder register entry, then the register, then the beneficial owner update.

Should You Sell Shares or Assets in Latvia?

Shares, in most startup sales, because the buyer wants the contracts, the team and the history as one object. An asset sale suits a buyer who wants the product and not the past, and it leaves you holding a company to wind down afterwards. The tax and the employee position differ sharply between them.

The last row is the one founders miss. In an asset sale the money lands inside the company, and getting it to yourself is a second, taxed step.

What Does a Buyer Check Before Buying a Latvian Company?

Most of the first pass is public and costs nothing. The register shows the shareholders, the board and who may sign alone, the beneficial owners, the annual accounts, and whether the company is in liquidation or insolvency. A pledge over the shares sits in the commercial pledge register, held by the Register of Enterprises, which keeps it open to anyone.

• The shareholder register. Who owns what, and whether the chain of transfers is clean. The cap table guide explains what the file does and does not show.
• The board and representation rights. Who can bind the company, and whether they may act alone. Our board composition report has the register-wide picture.
• Pledges. A commercial pledge over the shares or over the company's assets is registered and public, and it will be found.
• Accounts. Filed annual reports, and whether they were filed on time. The compliance calendar lists what should be there.
• Tax standing. Debts, disputes and whether payroll has been declared as it should be.
• The cap table's paperwork. Option grants, convertibles and any promise made in an email that a buyer's lawyer will read as a claim on the equity.

Assume the buyer runs all of this before the first call. The value of getting it right is not that it impresses anyone: it is that nothing surfaces halfway through, when your leverage is lowest.

Whose Consent Do You Need to Sell Shares in a Latvian SIA?

The other shareholders first. A Latvian SIA gives its shareholders pre-emption rights over a sale, and they have one month from notice, unless the articles set a shorter period to use them. The articles can add consent requirements on top, and the shareholders' agreement usually does.

• Pre-emption. Notice goes to the other shareholders, and the clock runs before you can sell to an outsider.
• The articles. Some require a shareholder decision on any transfer, and some restrict transfers of a particular class.
• The shareholders' agreement. Drag-along and tag-along clauses decide whether a majority can force everyone out, or a minority can insist on coming along.
• Contracts. Bank facilities, leases and enterprise customer agreements frequently carry change of control clauses. These are not company law and nobody will remind you.
• Public funding. Grants and loans from state instruments come with conditions that can survive a sale. The public money guide covers which.

Do You Need Competition Clearance to Sell a Latvian Company?

Only above the turnover thresholds, which most startup sales are nowhere near. A deal is notifiable when the parties turn over EUR 30 million in Latvia between them in the previous financial year, with at least two of them at EUR 1.5 million each. Below that there is no filing and no waiting period.

The exception is worth knowing. The Competition Council can require a report up to 12 months after a deal closes, where the parties are in the same market with a combined share above 40% and there is reason to think competition would be materially reduced. So a small deal between two companies that dominate one narrow market is not automatically outside the regime.

Where a filing is needed but the overlap is slight, a short-form report is allowed, including where the parties are in one market with a combined share no higher than 20%.

Does the Latvian State Have to Approve the Sale?

Only for companies that are significant to national security, which means a company that owns or holds category A, B or C critical infrastructure, or meets one of the conditions the chapter lists. For those, the Cabinet of Ministers decides whether a qualifying holding, decisive influence or a transfer of the undertaking may pass to a new owner.

Most software companies are outside this. It matters if you hold critical infrastructure, operate in electronic communications, or sit in one of the other categories the chapter lists, and it matters more when the buyer is from outside the European Union. Establish which side of the line you are on before you sign, because the permission is a condition of the deal and not a formality afterwards.

What Happens to Employees When a Latvian Business Is Sold?

In a share sale, nothing: the employer is the same company with a new owner. In an asset sale the rights and obligations from the employment relationships in force pass to the acquirer, so the team moves with the business whether or not the buyer wanted all of it.

Both sides then owe the employees information. The transferor must tell employee representatives, or the employees themselves where there are none, about the date, the reasons and the legal, economic and social consequences no later than one month before the transfer. If either side plans organisational, technological or social measures because of the transfer, consultations start at least three weeks beforehand.

A transfer is not by itself a ground for dismissal. Redundancies that follow have to stand on their own reasons, and the cost of hiring guide sets out what ending employment in Latvia costs.

How Is Selling a Latvian Company Taxed?

It depends who is selling. An individual pays personal income tax on the gain, the difference between what the shares cost and what they fetched, at 25.5%. A company pays nothing at the moment of sale, because Latvia taxes distributed profit rather than profit earned.

For an individual the declaration timing follows the size of the gain. Capital asset income above EUR 1,000 in a quarter is declared quarterly, by the fifteenth day of the month after the quarter. Below that it goes in a yearly declaration due by the fifteenth of January in the following year.

For a company the relief is in the corporate tax base rather than in the gain. Income from selling shares held for at least 36 months reduces the dividends the seller has to include in its taxable base, so the proceeds can reach the owners without the usual charge on distribution. It does not apply to shares in a person that sits in, or was set up in, a low-tax or no-tax country or territory, which is the reason a holding company in the wrong jurisdiction can cost more than it ever saved. The corporate income tax guide explains the distribution model this sits inside.

Option holders are a separate question, and the answer depends on whether the plan met the exemption conditions. The ESOP guide covers what an exit does to them.

What Does an Earn-Out Look Like Under Latvian Law?

Like several sales rather than one. Each payment is capital income when it is received, so an earn-out running three years produces three years of declarations at 25.5%, quarterly in any quarter the seller's capital income passes EUR 1,000. Money held in escrow is not income until it is released.

Latvian law has no special earn-out regime. The section above describes a clean sale with one payment, and everything below is what changes when the price arrives in pieces.

• The tax point is the hard part, and the statute delegates it. Article 16 of the Personal Income Tax Act acknowledges that the date of the contract, the date the money arrives, the transfer of ownership, and the conditions the contract depends on may fall in different taxation periods, and leaves the rule for fixing the day income is derived to a Cabinet regulation. That is worth reading with your accountant before signing, not after, because a deal structured across a year end can land the whole gain in the earlier year.
• The acquisition value is spent once. The gain is the disposal price less what the shares cost and what was invested in them while held. That cost base does not renew with each instalment, so the allocation between payments has to be agreed and documented rather than assumed.
• The filing cadence changes shape. A single payment usually means one declaration. An earn-out means watching the EUR 1,000 quarterly threshold for several years, filing by the fifteenth day of the month after the quarter in the quarters that cross it and by the fifteenth of January in the following year in the years that do not. Founders who have moved abroad by year three tend to be the ones who miss this.
• Escrow defers, it does not reduce. A retention held against warranty claims is not received, so it is not yet income. When it is released it is capital income in that period, at the rate then in force rather than the rate at completion.
• An earn-out paid for staying is not always capital income. Where the payment is conditional on the seller continuing to work in the business, a tax authority can read it as remuneration rather than as sale proceeds, which moves it into employment income with contributions. Keeping the earn-out tied to the company's performance rather than to the seller's employment is the usual answer, and it needs to be visible in the drafting.

The corporate seller's position is different again: a company selling shares it has held long enough gets the relief described above, and an earn-out does not disturb it, but the relief applies as the income is recognised rather than at completion.

What Has to Be Filed After the Sale Completes?

Three filings, and they are quick. The company records the transfer in its shareholder register and sends the new section to the register, with the notarised signatures of both the seller and the buyer on the entry. The information behind a new register entry goes in within 14 days of the decision behind it.

Then the beneficial owners. A change has to be filed within 14 days of the company learning of it, and a sale almost always changes them. The registration guide covers what the register holds about a company and who can see it.

Practical housekeeping follows: bank signatories, the authorised representative for the tax authority's electronic system, domain and account ownership, and anything registered in a founder's personal name. None of it is company law, and all of it stalls a handover.

Frequently Asked Questions

Do You Pay Tax When You Sell Shares in a Latvian Company?

An individual pays personal income tax on the gain at 25.5%, declared quarterly above EUR 1,000 of capital asset income in a quarter and yearly below it. A selling company pays on distribution instead, with relief for shares held at least 36 months.

Can a Foreign Buyer Buy a Latvian Company?

Yes, and most buyers of Latvian startups are foreign. The exceptions are companies significant to national security, where the Cabinet of Ministers decides whether the stake may change hands.

Do the Other Shareholders Have to Agree to a Share Sale?

They have pre-emption rights, which is not the same as a veto: they may buy the shares themselves on the terms offered, within one month from notice, unless the articles set a shorter period. The articles or a shareholders' agreement can add a consent requirement on top.

Does Selling a Business in Latvia Fire the Employees?

No. In an asset sale the employment rights and obligations pass to the acquirer, and the transfer itself is not a ground for dismissal. In a share sale the employer does not change at all.

How Long Does It Take to Register a New Owner?

The filing behind a register entry is due within 14 days of the decision, and the beneficial owner change within 14 days of the company learning of it. The register's own decision on an application is a matter of days rather than weeks.

Sources

• The Commercial Law, for share transfers, the shareholder register, pre-emption rights and filing deadlines.
• The Competition Law, for merger notification thresholds, the call-in power and short-form reports.
• The National Security Law, for companies significant to national security and who permits a change of control.
• The Labour Law, for transfer of an undertaking, and the information and consultation duties.
• The personal income tax law, for the rate on capital gains and when the declaration is due.
• The corporate income tax law, for the holding period relief and what it excludes.
• The Commercial Pledge Law, for the pledge register a buyer will search.
• The anti-money laundering law, for the beneficial owner filing deadline.

A sale is the one moment when everything you did with the paperwork becomes someone else's problem to check. The cleaner the register reads, the shorter that conversation is.