DRAFT LAW ON COMING INTO FORCE OF ASSOCIATION AND FOUNDATION LAW (unofficial translation)

CHAPTER I. General Provisions

Section 1. Entry in the Association and Foundation Register

From the day of coming into force of the Association and Foundation Law, entry of associations and foundations in the Association and Foundation Register shall be performed in accordance with the Association and Foundation Law and this Law.

Section 2. Association and Foundation Register institution

(1) In the process of registration, the provisions of the Law on the Enterprise Register of Latvia shall apply to such issues as are not regulated by this Law and by the provisions of the Association and Foundation Law regarding the Association and Foundation Register.

(2) A registration certificate issued by the Association and Foundation Register institution shall be a document on the basis of which alterations shall be made in the relevant registers and other documents, in accordance with the procedures determined by law.

(3) Until the end of the transition period (Section 9, Paragraph one; Section 15, Paragraph one), the provisions of Section 16, Paragraph three, of the Association and Foundation Law shall not apply, and the decisions on making entry in the Association and Foundation Register, or on refusal to make entry, or on postponement of entry, shall be taken within 14 days from the day of receipt of the application.

Section 3. Registration of Public Organisations and Their Groupings in the Public Organisation Register

(1) From the day of coming into force of the Association and Foundation Law, registration in the Public Organisation Register of newly founded public organisations or public organisations formed as a result of reorganisation, or their groupings, provided for in the Law on Public Organisations and Their Groupings, shall not be permitted.

(2) Two months from the day of coming into force of the Association and Foundation Law, it shall be permitted to register in the Public Organisation Register a new entity referred to in Paragraph one of this Section, if the decision on its founding was taken prior to the day of coming into force of the Association and Foundation Law, and the application for registration was submitted not later than a month from the day of coming into force of the Association and Foundation Law.

(3) Registration of amendments and other alterations in the basic documents of public organisations and their groupings until the time limit indicated in Section 9, Paragraph one, of this Law, shall be performed in conformity with the provisions of laws regulating registration of the relevant public organisations and their groupings, taking account of the exceptions referred to in this Law.

Section 4. Registration of Non-profit Undertakings (Companies) in the Enterprise Register

(1) From the day of coming into force of the Association and Foundation Law, registration in the Public Organisation Register of newly founded non-profit undertakings (companies), or non-profit undertakings (companies) formed as a result of reorganisation, shall not be permitted.

(3) Registration of amendments and other alterations in the basic documents of non-profit undertakings (companies) until the time limit indicated in Section 15, Paragraph one, of this Law, shall be performed in conformity with the provisions of laws regulating registration of the relevant non-profit undertakings (companies), taking account of the exceptions referred to in this Law.

Section 5. Meaning of Terms

The terms "association" and "foundation" used in the Association and Foundation Law shall correspond to the concept of "public organisation", as well as to the concepts "grouping of public organisations" and "non-government organisation" in other regulatory enactments.

Section 6. State Fees

Entities that are re-registered from the Public Organisation Register to the Association and Foundation Register shall be exempted from the State fees for re-registration and making related alterations in other registers.

Section 7. Laws Applied during the Transition Period

(1) To the operation and liquidation of public organisations and their groupings registered in the Public Organisation Register, until their entry in the Association and Foundation Register, the laws regulating the operation of relevant public organisations and their groupings shall apply, unless otherwise determined by this Law.

(2) To the operation and liquidation of non-profit undertakings (companies) registered in the Enterprise Register, until their entry in the Association and Foundation Register, the laws regulating the operation of non-profit undertakings (companies) shall apply, unless otherwise determined by this Law.

(3) From the moment of entry, the provisions of the Association and Foundation Law shall apply to the entities entered in the Association and Foundation Register.

CHAPTER II. Transitional Period for the Public Organisations and Their Groupings Registered in the Public Organisation Register

Section 8. Transformation of Public Organisations and Their Groupings

(1) A public organisation registered in the Public Organisation Register, or their grouping, shall be transformed, upon decision of a meeting of members (general meeting), into an association or a foundation, and submitted for the entry in the Association and Foundation Register, or liquidation of such organisation (grouping) shall be initiated, upon decision of a meeting of members (general meeting), applying for its registration in the Public Organisation Register.

(2) A decision on transformation of a public organisation, or their grouping, or on amendments to the articles of association, which are necessary in order to apply for the entry of the public organisation, or their grouping, in the Association and Foundation Register, shall be taken at the meeting of members (general meeting) with a simple majority of votes. A meeting (general meeting) shall be convened in accordance with the procedures set out in the Law on Public Organisations and Their Groupings, and in the articles of association of the relevant public organisation or their grouping. A repeatedly convened meeting (general meeting) shall be entitled to take decisions without application of the provisions of law and articles of association regarding the necessary quorum, if at least two members participate.

Section 9. Entry of Public Organisations and Their Groupings in the Association and Foundation Register

(1) Public organisations registered in the Public Organisation Register, or their groupings, shall be entered in the Association and Foundation Register on the basis of an application that shall be submitted to the Association and Foundation Register by 31 December 2004.

(2) The application regarding entry in the Association and Foundation Register shall be signed by all the officials of the association or foundation, who have representation rights.

(3) The application regarding entry in the Association and Foundation Register shall include the information indicated in Section 14 of the Association and Foundation Law, as well as the registration number in the Public Organisation Register.

(4) The application shall be accompanied by:

1) the decision of the meeting of members (general meeting) on entry of the public organisation or their grouping in the Association and Foundation Register;

2) the text of amendments to the articles of association, and the complete revised text of the articles of association; and

3) the announcement of the Board regarding the legal address of the association or foundation.

(5) If the association or foundation to be entered in the Association and Foundation Register is re-registered from the Public Organisation Register, the relevant entity shall be excluded, from the moment of making such entry, from the Public Organisation Register, and a relevant entry shall be made in the Public Organisation Register.

(6) The entity entered in the Association and Foundation Register shall be successor to the rights of the relevant transformed public organisation or their grouping.

Section 10. Acquisition of the Status of Members and Founders

(1) If a public organisation is transformed into an association, all members of the public organisation become members of the association from the moment of entry of the relevant association in the Association and Foundation Register. The founders of the relevant public organisation shall be regarded as the founders of such association.

(2) If a public organisation is transformed into a foundation, all members of the public organisation become the founders of the relevant foundation from the moment of entry of the relevant foundation in the Association and Foundation Register.

Section 11. Territorial Units

(1) Upon entry of a public organisation or their grouping in the Association and Foundation Register, the territorial units of the relevant public organisation or their groupings shall lose the status of a legal person.

(2) Upon entry of a public organisation or their grouping in the Association and Foundation Register, the rights and obligations of the territorial unit shall pass over to the relevant association or the foundation.

Section 12. Examination of Applications after Expiration of the Time Period for Submission

(1) The Association and Foundation Register institution shall examine all applications submitted within the time period referred to in Section 9, Paragraph one, of this Law. Applications submitted after expiration of this time period shall not be examined.

(2) If, after the time limit for submission of an application specified in Section 9, Paragraph one, of this Law, the Association and Foundation Register takes a decision on refusal of entry, the provisions regarding termination of operation and exclusion from the Public Organisation Register (Section 13) shall apply from the day following the decision on refusal. If, in such case, a decision on postponement of entry is taken, the provisions of Paragraph three of this Section shall apply.

(3) If the time period for submission of an application regarding entry in the Association and Foundation Register, specified in this Law, ends before the time limit indicated in the decision of an official of the Association and Foundation Register institution on postponement of entry, in order to eliminate deficiencies, the provisions on termination of operation and exclusion from the Enterprise Register (Section 13) shall apply from the day following:

1) expiration of the time period indicated in the decision, if the updated documents were not submitted during this time period; or

2) taking the decision on refusal, if the documents submitted do not repeatedly conform to the provisions of the Law.

(4) In the cases referred to in Paragraph three of this Section, a repeated decision on postponement of entry shall not be permitted.

Section 13. Termination of Operation and Exclusion from the Public Organisation Register

(1) If a public organisation has not applied for entry in the Association and Foundation Register within the time period specified in Section 9, Paragraph one, and no application has been made to the Association and Foundation Register institution regarding its liquidation, it shall be liquidated in accordance with the procedures set out in this Section.

(2) From the day following expiration of the time period referred to in Section 9, Paragraph one of this Law, the public organisation shall be deemed as having terminated its operation. The Association and Foundation Register institution shall publish the list of such public organisations in the newspaper Latvijas Vēstnesis, indicating:

1) the registration number and the name; and

2) notification that the creditors may submit their claims within three months from the day of publication (Paragraph three of this Section).

(3) Within three months from the day of publication all creditors of the relevant public organisation and the tax administration may notify the Public Organisation Register of their claims of property against the public organisation.

(4) If the Public Organisation Register institution has not received any notification of claims, and no commercial pledge has been registered with the Commercial Pledge Register, the public organisation shall be excluded, upon the decision of an official of the Association and Foundation Register, from the Public Organisation Register without entry in the Association and Foundation Register.

(5) If the Public Organisation Register institution has received a notification of claims within the time period specified in Paragraph three of this Section, of a commercial pledge has been registered with the Commercial Pledge Register, and liquidation of the public organisation has not been notified by 31 December 2004, such public organisation shall be liquidated in accordance with the Association and Foundation Law.

(6) Property remaining after the liquidation of a public organisation and its exclusion from the Public Organisation Register in conformity with the provisions of this Section, shall be treated as property without heirs in accordance with Section 417 of the Civil Law.

CHAPTER III. Transitional Period for Non-profit Undertakings (Companies) Registered in the Enterprise Register

Section 14. Transformation of Non-profit Undertakings (Companies)

(1) Unless otherwise specified in other laws, a non-profit making undertaking (company) registered in the Enterprise Register shall be transformed, upon decision of the owner or a meeting of members (general meeting), into an association or a foundation, applying for its entry in the Association and Foundation Register, or transformed into a commercial entity, applying for its entry in the Commercial Register, or liquidation of such undertaking (company) shall be initiated, upon decision of the owner or a meeting of members (general meeting), applying for its registration in the Enterprise Register.

(2) A non-profit undertaking of one owner, as well as a non-profit company consisting of one member, cannot be transformed into an association.

(3) A decision on transformation of a non-profit undertaking (company) or on amendments to the articles of association that are necessary in order to apply for entry in the Association and Foundation Register, shall be taken by the owner of the undertaking or a meeting of members (general meeting) of the company with a simple majority of votes of the participants. If a company consists of several members, not less than two members shall participate in the meeting. The meeting (general meeting) shall be convened in accordance with the procedures set out in the law regulating the form of the relevant company and in the articles of association of the relevant company. A repeatedly convened meeting (general meeting) shall be entitled to take decisions on transformation of the company into an association without application of the provisions of law and the articles of association regarding the necessary quorum.

(4) The equity capital and the capital shares of the non-profit company to be transformed shall be extinguished upon its entry in the Association and Foundation Register. A company shall not repurchase capital shares from the members, and the members shall not receive compensation for the extinguished capital shares.

Section 15. Entry in the Enterprise Register of Non-profit Undertakings (Companies) Registered in the Association and Foundation Register

(1) A non-profit undertaking (company) registered in the Enterprise Register shall be entered in the Association and Foundation Register on the basis of an application that shall be submitted to the Association and Foundation Register institution by 31 December 2004.

(2) An application on entry in the Association and Foundation Register shall be signed by all officials or the association or foundation, who have representation rights.

(3) An application on entry in the Association and Foundation Register shall include the information indicated in Section 14 of the Association and Foundation Law, as well as the registration number in the Enterprise Register.

(4) An application shall be accompanied by:

1) the decision of the owner or a meeting of members (general meeting) on entry of the non-profit undertaking (company) in the Association and Foundation Register;

2) for one-owner undertakings – the text of the articles of association, and for companies – the text of amendments to the articles of association and the complete revised text or the articles of association; and

3) a notification of the Board regarding the legal address of the association or the foundation.

(5) If the association or foundation to be entered in the Association and Foundation Register is re-registered from the Enterprise Register, from the moment of such entry the relevant entity shall be excluded from the Enterprise Register. A relevant entry shall be made thereof in the Enterprise Register.

(6) The entity entered in the Association and Foundation Register shall be successor to the rights and obligations of the relevant transformed non-profit undertaking (company).

(7) Entry in the Commercial Register shall be performed in accordance with the Commercial Law and the Law on Coming into Force of the Commercial Law.

Section 16. Joining of a Non-profit Undertaking (Company)

(1) A non-profit undertaking (company) whose sole owner (member) is a public organisation, or their grouping, subject to re-registration determined by this Law, may be joined, without transformation, to the relevant public organisation or grouping thereof, entering it in the Association and Foundation Register.

(2) The provisions of the Association and Foundation Law with respect to reorganisation by joining, as well as the provisions of Section 15, Paragraph four, of this Law shall apply respectively.

(3) If joining is performed in cases referred to in Paragraph one of this Section, the reserve fund of the non-profit undertaking (company) shall not be alienated and shall be transferred to the acquiring association or foundation.

Section 17. Status of Members and Founders

(1) If a non-profit undertaking of one owner is transformed into a foundation, the owner shall become the founder of the foundation upon entry of the relevant foundation in the Association and Foundation Register.

(2) If a non-profit company is transformed into a foundation, all members of the foundation shall become the founders of the foundation upon entry of the relevant foundation in the Association and Foundation Register.

(3) If a non-profit company is transformed into an association, all members of the company shall become members of the association upon entry of the relevant association in the Association and Foundation Register. The founders of such association shall be the persons who founded the non-profit company, but if the non-profit status was not acquired upon founding, the members who voted for acquisition of the non-profit status.

Section 18. Branches and Territorial Units

(1) Upon entry of a non-profit undertaking (company) in the Association and Foundation Register, the territorial units of the relevant non-profit undertaking (company) shall lose the status of a legal person.

(2) Upon entry of a non-profit undertaking (company) in the Association and Foundation Register, the rights and obligations of the territorial units shall pass over to the relevant association or the foundation.

Section 19. Examination of Applications after Expiration of the Time Period for Submission

With respect to non-profit undertakings (companies) Section 12 of this Law shall apply.

Section 20. Termination of Operation and Exclusion from the Enterprise Register

(1) If a non-profit undertaking (company) has not applied for entry in the Association and Foundation Register or the Commercial Register within the time period specified in Section 15, Paragraph one, and no application has been made to the Enterprise Register regarding its liquidation, it shall be liquidated in accordance with the procedures set out in this Section

(2) From the day following expiration of the time period referred to in this Chapter, the non-profit undertaking (company) shall be deemed as having terminated its operation. The Enterprise Register shall publish the list of such undertakings (companies) in the newspaper Latvijas Vēstnesis, indicating:

1) the registration number and the name; and

2) notification that the creditors may submit their claims within three months from the day of publication (Paragraph three of this Section).

(3) Within three months from the day of publication all creditors of the relevant undertaking (company) and the tax administration may notify the Enterprise Register of their claims of property against the undertaking (company).

(4) If the Enterprise Register has not received any notification of claims, and no commercial pledge has been registered with the Commercial Pledge Register, the undertaking (company) shall be excluded, upon the decision of an official of the Association and Foundation Register, from the Enterprise Register without entry in the Association and Foundation Register.

(5) Property remaining after satisfaction of the creditors’ claims shall not be transferred to the owner of the undertaking or the members of the company.

(6) Property remaining after exclusion of an undertaking (company) from the Enterprise Register in conformity with the provisions of this Section, shall be treated as property without heirs in accordance with Section 417 of the Civil Law.

CHAPTER IV. Special Provisions

Section 21. Unfinished Liquidation Proceedings

(1) By the day of coming into force of the Association and Foundation Law, the initiated liquidation proceedings, notified to the Enterprise Register or the Public Organisation Register, of non-profit undertakings (companies), their branches, divisions and representative offices, as well as of public organisations and their groupings, shall be finished by 31 December 2004, applying for registration in the Enterprise Register or Public Organisation Register respectively.

(2) A liquidation process initiated after the day of coming into force of the Association and Foundation Law on the basis of a decision of the owner or members, shall be finished by 31 December 2005, applying for registration in the Enterprise Register or Public Organisation Register respectively.

(3) To the liquidation proceedings referred to in Paragraphs one and two of this Section, the provisions of such laws and articles of associations shall apply as were effective on the day when the decision on liquidation was taken.

(4) If the liquidation proceedings are not finished within the time periods indicated in Paragraphs one and two of this Section, the relevant entity shall not have the right to operate from the day following expiration of the time period, and shall be held liable for violations of these provisions as for operation without registration in accordance with law.

Section 22. Initiated Insolvency Proceedings

A non-profit undertaking (company), registered in the Enterprise Register, which has been declared insolvent by 31 December 2004, shall retain its previous form of entrepreneurial activity for the whole period of insolvency proceedings until termination of the insolvency case.

Section 23. Reserve Fund of a Non-profit Undertaking (Company)

(1) If a non-profit undertaking (company) is entered in the Commercial Register as a commercial company, the reserve fund shall be included in the capital of the commercial company, and its corresponding capital shares (stocks) shall be transferred to the State. If the property of a local government has been incorporated in a non-profit company, the capital shares (stocks) corresponding to the reserve fund shall be transferred to the relevant local government.

(2) If a non-profit undertaking (company) is transformed into an association or a foundation in accordance with the procedures set out in this Law, and acquires, within a year from the entry in the Association and Foundation Register, the status of a public benefit organisation, the reserve fund that has been created as a result of activity of the non-profit undertaking (company) by including in this fund income which exceeds expenses, shall not be alienated and shall pass over to the association or the foundation.

(3) If a non-profit undertaking (company) is transformed into an association or a foundation in accordance with the procedures set out in this Law, and does not acquire, within a year from the entry in the Association and Foundation Register, the status of a public benefit organisation, the reserve fund that has been created as a result of activity of the non-profit undertaking (company) by including in this fund income which exceeds expenses, shall be alienated and shall pass over to the association or the foundation, if the association or the foundation has paid to the basic State budget that part of the reserve fund, which has been calculated by applying the tax rate specified for residents in the Law on Enterprise Income Tax.

(4) The income, gained as a result of activity of a non-profit organisation, which exceeds the expenses and which has been acquired by members through violation of the provisions of this Law, shall be included in the State income.

Section 24. Political Organisations (Parties)

This Law shall not apply to political organisations (parties).

Transitional Provisions

1. Until adoption of a relevant law, political organisations (parties) shall continue functioning in accordance with the provisions regarding political organisations (parties) of the Law on Public Organisations and Their Groupings.

2. Until adoption of relevant laws with respect to such associations and foundations as have been formed by transformation of corporations (professional associations), professional creative organisations and their groupings, as well as sports public organisations and their groupings, Section 57, 57.5, Paragraph three of Section 58, and Section 60, of the Law on Public Organisations and Their Groupings shall apply.

3. Until adoption of relevant laws, State non-profit scientific or educational undertakings founded by higher educational institutions, and State non-profit scientific undertakings (companies) shall continue operation, after coming into force of the Association and Foundation Law, in conformity with the laws, in accordance with which they have been founded.

4. Until adoption of relevant laws, culture institutions that have been founded as State non-profit undertakings (companies) on the basis of separate laws, shall continue operation, after coming into force of the Association and Foundation Law, in conformity with the laws, in accordance with which they have been founded.

5. The Ministry of Finance shall prepare and publish in the newspaper Latvijas Vēstnesis, by the day of coming into force of the Association and Foundation Law, model articles of association for associations and foundations, which shall be used for preparation of articles of association for registration in the Association and Foundation Register.

6. The Cabinet shall prepare and submit to the Saeima, by {…}, draft laws on political parties, and submit drafts regarding necessary amendments to other laws.