The directive adopted by the EU in 2019 provides for the regulation of preventive restructuring, cancellation and disqualification of debt obligations and measures to increase the efficiency of procedures related to restructuring, insolvency and cancellation of debt obligations.
The adopted amendments will ensure the fulfillment of Latvia’s obligations towards the EU, ensuring the compliance of the national regulation with the directive on restructuring and insolvency, providing for the most essential necessary amendments in the regulation of the legal protection process, the insolvency process of legal entities and the insolvency process of natural persons, while solving certain problematic issues identified at the national level.
The regulatory acts regulating the field of insolvency conceptually correspond to the scope contained in the European Parliament (EP) directive on the regulation of preventive restructuring, cancellation and disqualification and measures to increase the efficiency of the procedures related to restructuring, insolvency and cancellation of debts, that is, the Latvian national regulation already provides for the possibility of financial restructuring debtors in difficulty, as well as giving entrepreneurs a second chance. Also, national monitoring of the involved specialists is already planned, as well as the requirements for such specialists.
However, until now, several nuances of the national regulation do not fully comply with the requirements of the directive, and therefore amendments to the regulatory acts were necessary.
The improvement of the national regulation has also been identified under the influence of national practice and the development of the insolvency field. With the development planning documents and the government’s declaration, it has been established that it is necessary to improve not only cost control in insolvency processes, but also to ensure that the natural person’s insolvency process is applicable to a bona fide debtor.
The amendments have been made in connection with the entry into force of the Law on the Bank of Latvia on January 1, 2023. Taking into account the fact that the Law on the Bank of Latvia was adopted by the Saeima on September 23 of last year, by which the Financial and Capital Market Commission is attached to the Bank of Latvia, as well as in the Law on the Bank of Latvia changing terminology regarding financial market participants, appropriate technical amendments to the Insolvency Law were necessary. Therefore, in the bill, the words “financial and capital market participants” have been replaced by the words “financial market participants” and the words “Financial and Capital Markets Commission” by the words Bank of Latvia.
Also, the regulation contained in the Law on Civil Procedure was clarified in connection with the law of November 1, 2018 “Amendments to the Law on Credit Institutions”, by which the regulation on the bankruptcy procedure and rehabilitation of credit institutions is excluded from the Law on Credit Institutions, including revising the procedure by which the administrator of the insolvency process is transferred to the court for evaluation candidate for the position, and the rule on the court’s obligation to declare the administrator’s certificate and seal invalid is excluded, as well as the regulation on the appointment of several administrators or liquidators in the specific process is excluded.
The essence of these amendments is to simplify and make the insolvency process of credit institutions more transparent, excluding from the insolvency process of credit institutions rehabilitation and bankruptcy as outdated and inappropriate regulation for the modern financial industry.
In addition, the Ministry of Justice states that the Law on the Restoration and Resolution of Credit Institutions and Investment Brokerage Companies has been in force since July 16, 2015, with the aim of ensuring that the application of restoration and resolution measures in relation to institutions and financial companies contributes to the stable operation of the financial system, as well as protect the interests of depositors and reduce the possibility of using state budget funds to rescue institutions and financial companies.
The amendments are also intended to ease the administrative burden, as the amendments will open the possibility for individual merchants and owners of individual companies, farms and fishing farms in the draft law to solve their financial difficulties in a single procedure – the insolvency process of a natural person, thus replacing the need to first apply the insolvency process of a legal entity and successively the insolvency of a natural person process by repeatedly identifying and realizing the debtor’s property, as well as evaluating transactions and creditors’ claims.
Therefore, although each of the proceedings currently has a different Insolvency Administrator, the administrative burden will be reduced for the administrators as a whole, as there will be no need to repeat the above steps.
Also, the administrative burden for administrators in connection with the right to withdraw from insolvency proceedings due to their complexity will be reduced, because in this way the administrator will not devote time and resources to a process, the course of which would have a high risk of inefficiency and violations of regulatory acts.
The amount of the administrative burden cannot be determined, as it directly depends on the specifics of each specific process.
Source: Diena.lv by www.diena.lv.
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