Further Amendments to Insolvency Law Planned - International Law Office

Amendments to Insolvency Law
Amendments to Civil Procedure Law
Amendments to Credit Institutions Law

In light of the global financial crisis and resulting increase in the number of cases of company insolvency, all countries need legislation that provides for efficient and flexible insolvency procedures. This can be achieved by reducing administration costs, determining shorter procedural terms or introducing other provisions in order to improve the efficiency of insolvency procedures or support the rehabilitation of companies that are experiencing difficulties. In Latvia, amendments are planned to a number of laws, with the amendments to the Insolvency Law being the most significant. The Saeima (Parliament) has recently adopted the draft amendments at their second reading – according to Latvian legislation, in order for these amendments to take effect, the Saeima must adopt them at their third reading.

Amendments to Insolvency Law

The amendments to the Insolvency Law aim to facilitate the application for legal protection proceedings for companies facing temporary financial difficulties, and improve the availability of insolvency proceedings to individuals by reducing the administrator's monthly fee from three minimum monthly salaries to one.

The amendments stipulate that it will be possible to implement legal protection proceedings, provided that the plan of action is approved by more than half of the unsecured creditors. At the same time, it is planned that the overall term for implementation of legal protection proceedings will be increased from one to two years.

Several proposals supplementing the initial wording of the draft law submitted were supported. Among other things, it is planned that:

• the accrual of a debtor's fines will be suspended upon the initiation of the legal protection proceedings, not upon the declaration thereof;
• legal protection proceedings will be terminated if more than half of the unsecured creditors (rather than the two-thirds stipulated in existing legislation) have not supported the plan of action within the established term and under the established procedure;
• the amount of defaulted debt required to initiate an insolvency will be set at Lats1,500 for legal entities (rather than Lats1,000 under the existing legislation); and
• the term for the submission of creditor claims to participate in insolvency proceedings will be reduced from the existing three-month period to one month.

Amendments to Civil Procedure Law

The Legal Commission of the Saeima has approved amendments to the Civil Procedure Law and has passed it for review in the meeting of the Saeima in its first reading. The law contains three chapters on court procedure in insolvency cases, which will also be changed in order to ensure consistency with the Insolvency Law. Changes have been drafted regarding the regulations on the transition from legal protection proceedings to insolvency proceedings in cases where a company is unable to meet the requirements of the legal protection proceedings. It is also expected that the Civil Procedure Law will be supplemented with provisions providing for the commencement of legal protection proceedings in cases of out-of-court legal protection proceedings.

Amendments to Credit Institutions Law

An article of the Credit Institutions Law regarding bank secrecy will be amended to specify in more detail the reporting obligation regarding client accounts and operations. The existing wording of the law stipulates that the insolvency administrator may receive data only after he or she becomes an authorized person of the company, which can occur only after the announcement of insolvency proceeding in court. The amendments entitle the insolvency administrator to obtain data regarding client accounts and operations before the insolvency is announced in court (ie, during the period between the initiation of insolvency proceedings and the announcement thereof).

For further information on this topic please contact Valters Diure at Klavins & Slaidins LAWIN by telephone (+3716 781 4848) or by fax (+3716 781 4849) or by email (valters.diure@lawin.lv).