The amendments of the Enterprise Bankruptcy Law came into force on July 1, 2008. Several essential changes were introduced with respect to the bankruptcy procedure in order to ensure the implementation of the EU law.
One of the fundamental differences refers to the basic understanding of the insolvency state of the enterprise. If a company has not carried out its obligations (e.g., has not settled debts or has failed to perform works paid for in advance) and the due payments of the company (e.g., debts, unperformed works, etc.) exceed half of the assets indicated in the company's balance sheet, the company is considered insolvent under the new wording of the law.
Notably, the amended law provides for shorter terms in which to sue the company claiming bankruptcy. Pursuant to the former provisions, the creditor was supposed to wait for three months after the obligations fall due before suing the debtor. Currently, the 30-day term for noticing the debtor regarding the potential lawsuit remains in the Enterprise Bankruptcy Law, but now the creditor's interests are better protected, as he or she may initiate the bankruptcy proceedings at the debtor's failure to perform his obligations on time. Considering all the amendments of the Enterprise Bankruptcy Law, it is obvious that the aim of the provisions is to accelerate the bankruptcy procedure, though several time requirements have been extended (e.g., the five-day term for the administrator to provide to the court an estimate of potential administration expenses is prolonged to 20 days).
A major novelty in the bakruptcy proceedings is the introduction of fines on the interruptors of effective and concentrated bankruptcy proceedings. A fine up to 10,000 litas may be imposed on the head of the company if he or she fails to provide the court with documents required for the commencement of bankruptcy proceedings or for failure to hand over all the documentation of the company to the bankruptcy administrator. Moreover, the suspended administrator may also be fined for delaying transfer of the company's documents to a newly appointed administrator; the fine may be imposed on the the persons preventing the administrator to enter the company undergoing bankruptcy proceedings, etc.
The amendments of the Enterprise Bankruptcy Law also refer to the liability of the head of the company. New provisions state that the head of the company, as well as any other person who has the right to adopt the decisions, must compensate damages incurred by late application to the court for the commencement of the bankruptcy proceedings. Moreover, the court is also entitled to limit from three to five years the right of the person to hold the office of the head of the public or private legal person.
Starting Jan. 1, 2009, the bankruptcy administrator shall be obliged to insure his civil liability against the damage caused while performing the bankruptcy proceedings to legal or natural persons. The minimum insurance premium is 200,000 litas to one insured event and 500,000 litas to all insured events per year. Currently the bankruptcy administrators may insure their civil liability voluntarily as the damage may be claimed by a stakeholder or any creditor of the company being dissatisfied for the potentially unprofitable sale of the company's assets or any other action. The compulsory insurance shall protect the persons who may also suffer damage for the negligent and careless administration of the company.
To sum up, the amendments of the Enterprise Bankruptcy Law shall ensure a more effective and time-saving bankruptcy procedure. The fines for any unjustifiable delay shall serve as a protection from the malicious administration or misuse of rights rendered by law to the persons participating in the bankruptcy procedure. o
Greta Makaraityte is an associate advocate at Jurevicius, Balciunas & Bartkus, a member of Baltic Legal Solutions, a pan-Baltic integrated legal network of law firms including Glikman & Partnerid in Estonia and Kronbergs & Cukste in Latvia, dedicated to providing a quality "one-stop shop" approach to clients' needs in the Baltics.