One sentence in the Commercial Law decides most arguments about a Latvian board member's liability, and it is not the one setting the standard. It is the next one, which leaves the board member to prove they did nothing wrong — and everything else follows from that.
One sentence in the Commercial Law decides most arguments about a Latvian board member's liability, and it is not the one setting 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.
Notice who has to prove what. 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 point the board member has to show they did not fall short. Everything else — what a release is worth, who can sue, how long the risk lasts — follows from where that burden sits.
What the standard actually requires
The law itself does not define it, but the courts have given it content: following the law, the articles and decisions of the members; being loyal to the company and staying out of decisions where you have a conflict; and keeping informed about the company's finances — whether it can pay, whether it is making money, whether it is solvent.
Three things follow that people get wrong. Liability attaches to any negligence, including the slight kind, and acting in good faith does not help. Conduct against the law can never meet the standard, and not knowing the law is no excuse. But the standard does take circumstances into account: a decision that turns out badly is not, by itself, a breach. And a board member cannot defend a claim by saying they were not able to do the job.
All of this comes from case law rather than the statute, so it is worth checking the current position before relying on it.
Board and council members are jointly and severally liable for losses they have caused. A claim can be brought against one of them for the whole loss, and sorting out the shares between themselves is their problem, not the company's. That is not a free choice of defendant, though: the liability covers losses the members have caused, so causation still has to be shown against whoever is sued.
In practice this makes records written at the time the entire defence. Minutes showing what was considered, what advice was taken and why a decision was made are not administrative tidiness in Latvia. They are the evidence the statutory defence is run on, years later, by someone who may no longer have access to the company's files.
The ways out, and what each is really worth
A lawful decision of the members 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. There is a mirror image shareholders often miss: where the meeting decides something that was the board's job to decide, the members who voted for it are jointly and severally liable for the losses that follow. Instructing the board moves the liability to whoever gave the instruction.
Council approval is not a way out. The law says plainly that approval by the council does not remove 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 can release or settle, but only for specific conduct that actually happened and was disclosed at the meeting. A blanket discharge for a year is not what the law offers. It also does not stop the minority from suing — and approving the annual report does not by itself release anyone for that year.
Who can sue
The company, on a decision of the members passed by a simple majority of those present — and the articles may not demand a bigger majority, something a shareholders' agreement cannot override.
A 5 per cent minority, even over the majority's objection. The company has to bring a claim demanded by members holding at least one-twentieth of the capital, or whose stake is at least EUR 100,000. If the responsible body does not file within one month, those members may bring the claim themselves. They do not have to remove the board or win a general meeting first — a month of inaction is enough.
It stays the company's claim, though. Anything recovered goes to the company, and members who demanded a claim that turns out to be unfounded are themselves liable where there was malice or gross negligence.
A creditor, for the company's benefit. A creditor who cannot get paid by the company may, within a year of the judgment taking effect, sue the people who caused the company's loss. This is the provision that changes the risk picture most, 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 came from carrying out a decision of the members' meeting. A release negotiated with shareholders is worth exactly as much as the company's own solvency.
How long it lasts, and what else is exposed
Claims run out five years from the day the loss was caused — not from when it was discovered, and not from when the person left the board.
Two liabilities sit outside all of this. A board member is liable to a shareholder, or to someone buying or selling a share, personally, for breaches of the rules on the register of members; none of the protections above applies. And competing with the company without consent lets the company claim damages or treat those deals as made on its own behalf — within three months of the other officers finding out, and no later than five years.
Pressure from outside is covered too. Anyone who deliberately gets an officer to act against the company's interests is liable together with that officer, unless the influence was exercised by voting at the members' meeting.
The duties that create the exposure
Report worsening finances early. Where losses reach half the share capital, or the company's ability to pay is limited, or signs of insolvency appear, the board has to report to the council and call the members' meeting. This bites long before any insolvency process is in sight.
Disclose related-party transactions to the members' meeting.
Report to the council every quarter, and immediately if anything deteriorates or anything material happens.
When the company fails
The Insolvency Law requires a company to file for insolvency without delay once the legal signs are there. 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. Filing late 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.