A favorable judgement of the Court of Economic Affairs for the client entered into force

March 11, 2024

In April of 2023 a favorable judgement of the Court of Economic Affairs for the client with which unlawfully taken decisions were reversed, entered into force.

A cassation appeal was filed against the judgement but by the decision of the assignments sitting of the Senate of Latvia the cassation proceedings were refused. Thus the judgement of the Court of Economic Affairs entered into force. The collegium of the Senate indicated that after assessing the arguments included in the cassation appeal, there is no reason to believe that in the contested judgement the outcome of the case would be wrong. Likewise no violation of the rule of procedural law, which could have led to misjudgment of the case, was detected.

The Court of Economic Affairs settled a dispute over the decision-making ability of the opponent’s single-handedly held meeting of members by assessing if the particular meeting of members could be regarded as a repeating meeting of members, during which the decisions can be made notwithstanding of the represented number of votes. That is, the opponent single-handedly held a meeting of members, which decided to remove the client from the board and replace him with the opponent as the new member of the board. Although having been aware of the fact that the meeting of the members held by the opponent did not have decision-making ability, he still used the narrow scope of the Enterprise register of the Republic of Latvia in document assessment and submitted the protocol of the meeting of members, thus being included in the Commercial register of the Republic of Latvia on the basis of unlawfully made decisions.

In regards to this this dispute the Chief state notary of the Enterprise register of the Republic of Latvia G.Paidere has explained that the legislator has not delegated any rights to the Enterprise register to conduct inspection into the circumstances, in which the documents submitted to the Enterprise Register have been prepared. The Chief notary of the Enterprise register reviews, if the documents to be registered have been prepared in accordance with the normative acts instead of checking if the facts stated in the documents are true. Both the Constitutional court of the Republic of Latvia and the Supreme Court of the Republic of Latvia has on several occasions acknowledged that the Enterprise register verifies the formal conformity of the document with the requirements specified in the law but does not evaluate the actual circumstances of the decisions made. In legal literature it has been pointed out that the state notary of the register of Enterprise is not entitled to assume that the information provided in the documents do not conform to reality despite stakeholders claiming it to be. The state notary of the Enterprise register does not have the rights to settle private disputes or to assess evidence in such a dispute. And exactly these were the circumstances the opponent used when submitting the unlawfully made decisions about the changes in the board.

Already when bringing action to court, the client asked to apply provisional application and to reverse the decision of the Enterprise register of the Republic of Latvia. The judge granted the request, thus renewing the board seat of the client by way of interim measures.

The Court of Economic Affairs, when examining the merits of the case, found that the opponent’s single-handedly held meeting of the members did not have decision-making ability and in accordance with part 1 of article 217 of the Commercial law that is the basis for declaring a decision invalid. The court found that the actions of the opponent were contrary to the principle of good faith outlined in Article 1 of Civil law and pointed out that the opponent with his dishonest behavior prevented the client from using legal remedies to prevent the registration of an unlawful decision in the Commercial register.

Therefore the Court of Economic Affairs decided to grant the claim of the client against the opponent about declaring the decisions listed in the protocol of the meeting of members invalid.