One sentence of the Commercial Law decides most disputes about a Latvian board member's liability, and it is not the one about the standard of conduct. It is the next one, which puts the burden of disproving fault on the board member — and what a release is worth, who can sue and how long the exposure lasts all follow from where that burden sits.
One sentence of the Commercial Law decides most disputes about a Latvian board member's liability, and it is not the one about the standard of conduct. It is the next one: a board member is not liable if they prove that they acted as a diligent and careful manager.
The presumption does not do all the work, and it is worth being precise about how much it does. The company must still prove the loss, its amount and that the board member's conduct caused it; what it does not have to prove is fault. On that question the board member has to show they did not fall short. What a release is worth, who can sue and how long the exposure lasts all follow from where that burden sits.
What the standard actually requires
The statute does not define it, but the courts have given it content: compliance with the law, the articles and members' decisions; loyalty and the avoidance of decisions taken in a conflict of interest; and staying informed about the company's financial position — liquidity, profitability, solvency.
Three things follow that are easy to get wrong. Liability attaches to any negligence, including slight negligence, and the absence of bad faith is irrelevant. Conduct contrary to law cannot meet the standard, and not knowing the law is no excuse. But the standard is contextual: a decision that turns out badly is not, of itself, a breach. A board member cannot answer a claim by saying they were unable to perform the office.
This content comes from case law rather than from the statute, so the current position is worth checking before relying on it.
Board and council members are jointly and severally liable for losses they have caused. A claim may be brought against one member for the whole loss, and the allocation between them is their problem. That is not a free choice of defendant, though: the liability runs to losses the members have caused, so causation must still be shown against whoever is sued.
In practice this makes contemporaneous records the whole defence. Minutes recording what was considered, what advice was taken and why a decision was made are not administrative hygiene in Latvia: they are the evidence on which the statutory defence is run, years later, by someone who may no longer have the company's files.
The ways out, and what each is actually worth
A lawful members' resolution is the strongest protection: a board member is not liable for loss caused by acting in good faith within a lawful decision of the members' meeting. It has a mirror image members frequently miss — where the meeting takes a decision within the board's competence, the members who voted for it are jointly and severally liable for the losses it causes. Instructing the board moves the liability to whoever gave the instruction.
Council approval is not a way out. The statute says expressly that the council's approval does not exclude the board's liability to the company. Sign-off is good governance, not a defence.
A release is narrower than it sounds. The members' meeting may release or settle, but only for specific conduct actually carried out and disclosed at the meeting. A general discharge for a period is not what the statute provides. It also does not restrict the minority's right to sue — and approving the annual report does not of itself release anyone for that period.
Who can sue
The company, on a members' resolution passed by a simple majority of those present — and the articles may not require a larger majority, a point a shareholders' agreement cannot override.
A 5 per cent minority, over the majority's objection. The company is obliged to bring a claim demanded by members holding at least one-twentieth of the share capital, or whose participation is at least EUR 100,000. And if the responsible body does not file within one month, the minority may bring the claim itself. No need to remove the board or win a general meeting first — a month of inaction is enough.
It remains the company's claim, though: what is recovered is recovered for the company, and members who demanded an unfounded claim are themselves liable where malicious intent or gross negligence is found.
A creditor, for the company's benefit. A creditor who cannot obtain satisfaction from the company may, within one year of the judgment taking effect, sue those who caused the company loss. This is the provision that most changes the risk picture, because of what does not stop it: the creditor's right survives even where the company has waived its claim, settled, or where the loss was caused in performing a decision of the members' meeting. A release negotiated with shareholders is worth exactly as much as the company's own solvency.
How long, and what else is exposed
Claims become time-barred five years from the day the loss was caused — not from discovery, and not from leaving office.
Two liabilities run separately. A board member is liable to a member or to a buyer or seller of a share, in that person's own right, for breaches of the rules on the register of members; none of the protections above applies. And competing with the company without consent lets it claim damages or treat the transactions as concluded on its own behalf — within three months of the other officers learning of it, and no later than five years.
Pressure from outside is covered too: a person who with malicious intent procures an officer to act against the company's interests is liable jointly with that officer, unless the influence was exercised by voting at the members' meeting.
The duties that generate the exposure
Report deteriorating finances early. Where losses reach at least half the share capital, or solvency is limited, or insolvency signs threaten, the board must report to the council and convene the members' meeting. This bites well before any insolvency process is in view.
Disclose related-party transactions to the members' meeting.
Report to the council quarterly, and immediately on any deterioration or other material circumstance.
When the company fails
The Insolvency Law requires the company to file for insolvency without delay once the statutory signs are present. If it is declared insolvent, the administrator takes over the board's functions, assesses liability and may sue — under the same provision, with the same burden on the board member, and with the administrator still having to prove the loss. A late filing is itself treated as falling short of the standard.
Once insolvency is declared it is the administrator, not the members' meeting, who decides whether to sue the board. This article does not address in detail the procedural rules of insolvency legislation; the liability described here also applies in insolvency proceedings.