Buy / Sell Business, Latvia, Legal Counsel, Legislation, Markets and Companies

Answer: Pursuant to Section 223, Paragraph 1 of the Commercial law of the Republic of Latvia (hereinafter referred to as the Law) all members of the board of an LLC (SIA) have the right to represent the company. Therefore a member of the board is entitled to enter into any transaction and undertake any obligations on behalf of the company (as well as the guarantee agreement mentioned in your question), if only his representation rights are not limited by a joint representation with another member of the board).  

Even if the Articles of Association of the company prescribe that a member of the board is restricted to enter into certain transactions, the restriction will not be valid in relation to third persons (according to Section 223, Paragraph 3 of the Law, the representation rights of the member of the board may not be limited in relation to third persons), but will only be binding on the member of the board himself. If the Articles of Association restricts conclusion of any agreement and still the agreement is signed by the member of the board, then it will be binding on the company as well, but the company will have the right to raise a claim against the member of the board for violating the Articles of Association. According to Section 223, Paragraph 4 of the Law, members of the board shall observe the restrictions prescribed in the Articles of Association and decisions of the shareholders’ meeting. Pursuant to Section 169 of the Law, members of the board of directors shall be liable for the losses of the company if only they won’t prove that they have acted, as would an honest and careful manager.  

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