Huge surge in company liquidations as result of finance sector clean-up

The number of companies being liquidated has risen dramatically as a result of ongoing efforts to destroy Latvia's reputation for money-laundering and to clean up the financial sector, according to data from the official Lursoft company register. 

On January 14 this year, the highest number of liquidated companies ever recorded in one day was registered with a staggering 6,647 merchants liquidated, more than in the whole of 2013. One month later on February 13, a further 3,408 companies were liquidated. 

The rise is a direct result of the Registry implementing the recommendations of last year's crucial Moneyval report which is the basis of the clean-up effort. Economically inactive companies and those that have not filed the necessary financial returns and other paperwork - classic signs of shell companies used in money-laundering operations - are being struck off as part of a major crackdown.

Guna Paidere, Chief State Notary of the Enterprise Register, said "This year we will exclude particularly high-risk companies that have not revealed their true beneficiaries, as well as excluding economically inactive companies from the business register under simplified liquidation procedures," in comments to the Dienas Bizness newspaper cited on the Lursoft website. 

Lursoft research showed that the great majority (75.81%) of all companies that were liquidated on January 14, was registered in Rīga and another 14.74% in the region immediately around Rīga. Only 40 companies were registered in eastern Latgale region.

The average age of the liquidated companies is 8 years, but there was one company among them that didn't even make it to its first birthday: Cleveroad Ltd. registered in April last year.

The winding up on January 14 also affected more than 200 construction companies, none of whom have submitted their annual report on economic activity in 2017. 

On January 14, the failure to submit annual reports was a major factor for the companies that were liquidated, as of the 6,647 companies, a company report for 2017 was available for only 12 firms. More than a half or 58.37% of the companies analyzed in the study have not submitted any annual reports during their activities.

In addition, almost one third of these companies had a tax debt of over €150 at the time of liquidation. The total tax debt of liquidated companies at the beginning of January amounted to EUR 10.48 million.

Of these, SIA LOGISTICS CONSULTING SERVICE, founded in 2006, has been the largest tax debtor: at the moment of liquidation it owed 1.76 million euros to the taxman. According to the company, its core business was related to business and management consulting, as well as wholesale of metals and metal ores. For the last five years, the only owner of the company has been Russian citizen Ekaterina Rezvykh and while it filed reports from 2006 to 2013, since then it has not done so.

According to latest figures, Latvia currently has 197,909 commercial entities of which 132,594 are active and 65,315 are in liquidation.


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