A number of issues in which caution should be exercised regarding this measurement exercise include:
While the selected procedures have their legal bases in the Commercial Law, over the years the Enterprise Registry progressively streamlined each of them in order to ease doing business and encourage entrepreneurship. Simplification measures have affected various procedural dimensions, such as the number of interactions and direct visits to the Registry; the compilation of forms and preparatory documents to be presented; the availability of state notaries directly at the Enterprise Registry to notarise signatures, etc. As a result, the requirements established in the law do not necessarily reflect the practice. This discrepancy is not directly explicit in the calculations, which measure the actual costs borne by the businesses. Possible future measures for legal simplification should take this caveat into account when considering the evidence from this measurement exercise.
The Enterprise Registry offers the possibility to accelerate the procedure, in particular for the registration process, with additional payment. This “fast-track” registration was not taken into consideration for the measurement, as it is not considered common practice, but rather an exception to the normal procedure.
On the basis of the discussions and interviews held by the OECD, it appears that in most cases applications for registering a company (both an individual merchant and an LLC with decreased capital) refer to legal addresses, for which the agreement of the owner is required. As a consequence, the calculations made by the OECD included the specific step of seeking and including the written consent in the application dossier.
It was also assumed that documents were presented in Latvian, since this is what the Register requires. If a document is issued in a foreign language, applicants must provide a translation certified by a notary. The additional time and costs that such an operation implies were not considered in the cost measurement.
A further assumption refers to the notarisation process. Applicants have the option to have recourse to a sworn notary for the recognition of signatures, or directly to a state notary at the Enterprise Registry. Since most of the applicants interviewed by the OECD indicated that they opted for the state notary procedure (see above), the measurement of the costs refers to this latter scenario. For the calculations, the assumption was that the time to get the appointment with the state notary was 24 hours and the cost per notarised signature was EUR 9, which is cheaper than doing it outside the institution.
The data collection for the calculations comes from direct interviews. Since it was not possible to organise focus groups for this purpose, the methodology relied on structured interviews with people familiar with the process (either businesses themselves or law firms providing support to businesses). Three entrepreneurs were interviewed for the procedure involving the registration of an individual merchant, nine for the registration of an LLC with decreased capital and ten lawyers shared their views while doing the merger by acquisition of two companies.
It shall also be noted that the OECD considered measuring opportunity costs linked to the procedure, notably in the case of the reorganisation of companies through merger by acquisition. Including opportunity costs highlights the potential impact of the waiting time. The opportunity cost measures the foregone benefits due to the impossibility to operate the desired economic activity. It was calculated through the rate of return and investments opportunities in the country.
The classical SCM methodology does not foresee the inclusion of opportunity costs for the waiting time. It only focuses on the time dedicated to the administrative activities required to comply with the information obligations. In case a given procedure generates delays or when no clear deadlines exist, waiting time may become a substantial source of costs, rendering the calculation of opportunity costs significant. In the particular case of the Latvian procedure for reorganisation through merger by acquisition, businesses continue operating during the time they need to wait (Stages 1 and 2 of the procedure). However, since the merger cannot take place in practice, businesses might miss possibilities to operate under the reorganised statutes (this might prevent them from expanding their economic activity or force them to postpone decisions that might have brought a benefit to the companies). The OECD measurement therefore provides results from the quantification of cost both with and without opportunity costs in relation to the reorganisation procedure.
