LATVIA Law and Practice Contributed by: Jānis Kārkliņš, Edijs Brants, Pauls Zeņķis and Kristens Vorslavs, BERG
annually for supervision of the credit service provider’s activities. B2B Conversely, if a non-bank lender does not meet the criteria of a credit institution and provides financing exclusively to other companies not consumers, no licensing is required to operate in a B2B context. 3. Structuring and Documentation 3.1 Restrictions on Foreign Lenders Providing Loans Foreign lenders are permitted to provide loans in Lat- via, but they must comply with Latvian legislation, including regulations on obtaining a licence and open- ing a representative office in Latvia in accordance with the Credit Institution Law. A credit institution of an EU member state can provide financial services in Latvia via the freedom to provide services or by establishing a branch without the need to obtain a licence in Latvia, if the requirements specified in the Credit Institution Law are met. In such instances, the branch continues to fall under the prudential oversight of the authority in its home member state while simultaneously adhering to the relevant regulatory obligations in Latvia. If bor- rowers themselves seek out foreign lenders, and these lenders do not market or advertise their activities to Latvian customers, they are not required to obtain a licence. 3.2 Restrictions on Foreign Lenders Receiving Security No legal restrictions apply to the receipt of securities or guarantees by a foreign lender that would differ from those applicable to a Latvian lender. 3.3 Restrictions and Controls on Foreign Currency Exchange In Latvia, foreign exchange transactions and the repa- triation of capital are not subject to any restrictions. Although, under national sanctions, if financial restric- tions are applied to a designated subject, all persons must, without delay, freeze the subject’s assets, deny access to funds or economic resources, and refrain from providing any financial services specified in the
national sanctions, including through third parties act- ing on their behalf or for their benefit. 3.4 Restrictions on the Borrower’s Use of Proceeds The borrower’s use of proceeds from loans or debt securities is generally not restricted by law, unless specific contractual or regulatory conditions apply. Certain loan types, such as EU co-financed or state- supported loans, may carry statutory or programme- specific restrictions on the permitted use of funds. Moreover, the borrower must comply with the AML, sanctions and counter-terrorism financing regulation. 3.5 Agent and Trust Concepts Agent Concept Latvian Civil Law and Commercial Law recognise the concept of agency, under which an agent may act on behalf of a principal. This relationship is regu- lated by the rules on representation, permitting the agent to carry out legal acts within the limits of their authority. The principal is responsible for the actions of the agent, as long as they are performed within the authorised scope. In addition, in syndicated financings a collateral agent may be appointed for the purpose of facilitating the satisfaction of claims arising from the syndicated loan. The same applies to collateral agents for debt securities, which may be appointed for the purpose of facilitating the satisfaction of claims arising from Contrary to the concept of agency, there is no specific legislation recognising trusts. The Latvian legal frame- work does not provide for the creation or administra- tion of trusts, and such arrangements do not have the status of a legal personality. The sole form of regula- tion applicable to trusts in Latvia is found in the Law on the Prevention of Money Laundering and Terror- ism and Proliferation Financing, which treats trusts as legal entities primarily for the purpose of identifying and monitoring their beneficiaries. Foreign trusts and comparable legal entities may operate in Latvia via branches or representative offices of foreign commer- cial companies established by them. During registra- tion in Latvia, these entities are required to provide debt securities. Trust Concept
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