Bankruptcy Procedures

- Concept of Associations and Foundations-

According to Associations and Foundation Law an association is a voluntary union of persons founded to achieve the goal specified in the articles of association, which shall not have a profit-making nature. A foundation, also a fund, is an aggregate of property that has been set aside for the achievement of a goal specified by the founder, which shall not have a profit-making nature. NGO obtain the status of a legal person at the moment when it is entered into the Register of Associations and Foundations.

An association and a foundation are liable to the extent of all its own property. An association is not liable for the obligations of a member. A member is not liable for the obligations of an association. A foundation is not liable for the obligations of a founder. A founder is not liable for the obligations of a foundation.

The name of an association and a foundation shall not be contrary to regulatory enactments and good morals, i.e., the name of a military body or the name of such organisation or group which has been recognised as criminal or anti-constitutional, for example, “Hitler, The Nazi etc.” shall not be included therein, it shall not create a positive attitude toward violence, and similar.

The name of a foundation shall contain the word “foundation” or “fund”. The name shall differ clearly and distinctly from other names of associations and foundations already registered or under application for registration in the Register of Associations and Foundations. Only the letters of the Latin alphabet shall be used in the name of associations and foundations in Latvia. Misleading information regarding the purpose of activities, type of activities and legal form shall not be included in a name. The name of an association or a foundation shall not coincide with the names of State or local government authorities (institutions), as well as contain misleading information that the association or foundation is endowed with a public power.

Rights to Perform Economic Activity-

An association and a foundation have the right to perform economic activity in the form of complementary activity, which pertains to the maintenance and utilisation of its own property, as well as to perform other economic activity to achieve the goals of the association or foundation. The income of an association or of a foundation may be utilised only for the achievement of the goal specified in the articles of association. Profit obtained from economic activity of an association or a foundation may not be divided among the members of an association or the founders of a foundation. If a person receives remuneration (consideration) for activity in an association or a foundation this remuneration (consideration) shall be determined in accordance with the scope of the duties of the respective person and the financial situation of the association or foundation. An association and a foundation, in order to achieve the goals laid down in the articles of association, have the right to perform activities which are not in contradiction with law, especially to distribute freely information regarding its own activities, to establish its own publications and other mass media, to organise meetings, street processions and pickets, as well as to perform other public activities.

An association and a foundation may apply to State and local government authorities in matters related to the goals of the activities of the respective association or foundation, as well as to maintain the rights of its members or interests protected by law in a court.

Founding of an Association-

Natural persons and legal persons may be founders of an association, as well as partnerships with legal capacity. The number of founders may not be less than two. In order to found an association, the founders shall take a decision regarding the founding of the association. The following information shall be indicated in a decision regarding the founding of an association:

1) the name of the association;

2) the objectives of the association;

3) the given name, surname and personal identity number of the founders, but for a legal person and partnership – the name, registration number and legal address;

4) the rights and obligations of the founders if the founders have agreed on such;

5) an authorisation (if such was given) for certain founders to sign the articles of association and an application to the Register authority; and

6) other information that the founders deem necessary. After the taking of the decision regarding the founding of an association the founders shall approve the articles of association of the association, elect an executive body of the association (hereinafter – the executive board), which may be collegial or single-member and other bodies if such have been provided for in the articles of association. A decision regarding the founding of an association shall be prepared in writing and it shall be signed by the all of the founders of the association. His or her authorised person who has participated in the taking of the decision may sign the decision on behalf of a founder. The authorisation in writing shall be attached to the decision. The articles of association of an association shall be prepared in writing. The articles of association shall specify – the name of the association, the objective of the association, the period of activity of the association (if an association is being founded for a certain period of time), preconditions for the entering into and removal from membership, the rights and duties of members, the procedures by which the rights and duties of a territorial or another division (if such are established) may be laid down, the procedures for the calling of a meeting of members and the taking of decisions, the name of the executive body, the quantitative structure thereof, prescribing the rights of the members of the executive body to represent the association individually or collectively and the structure, procedures for election, competence, procedures for the taking of decisions and terms of office of audit institutions of economic and financial activity or the procedures for the appointing and terms of office of a certified auditor. The founders shall submit to the Register authority an application for the entering of the association into the Register. A founder who has acted on behalf of an association before the entering of the association into the Register shall be liable for any obligations arising from this action. If several founders have acted on behalf of an association to be established, they shall be jointly liable. If a founder has not had the right to act on behalf of the association, any obligations arising from such action shall be transferred to the association if the meeting of members definitively approves these obligations.