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Court declares Latvian cosmetics manufacturer Dzintars insolvent

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Dzintars, Iļja Gerčikovs , Jānis Ozoliņš, cosmetics, insolvency, tax debtDzintars, Iļja Gerčikovs , Jānis Ozoliņš, cosmetics, insolvency, tax debtOn Tuesday, 12 November, Riga City Pardaugava Court declared Latvian cosmetics manufacturer AS Dzintars insolvent. Jānis Ozoliņš was appointed as the company’s insolvency administrator, as confirmed by the court’s representative Viktorija Mežance.

She explains that the insolvency process was initiated based on the report from insolvency administrator Mareks Diks. At the same time, legal protection process is terminated because it was found that Dzintars did not comply with requirements of the legal protection process plan of 25 April 2019 for longer than 30 days.

And so the court noticed signs of insolvency process as outlined in Part 1 of Section 57 of the Law on Insolvency. The court concluded that this is grounds for declaring an insolvency process for Dzintars legal person.

Mežance admits that the most notable creditor in this case was the State Revenue Service (VID), whose 11 October 2019 decision makes it clear that the tax administration does not agrees with Dzintars’ and VID’s submitted amendments to the legal protection process plan’s redaction of 20 September 2019.

There were several considerations at the base of the decision process. This includes the fact that Dzintars had not fully paid its tax fee – instead of the necessary EUR 1 764 574.60 the company paid EUR 273 239.60. This means the company’s tax debt is EUR 2 591 118.78.

Secondly, the total tax and other state compulsory fees debt of Dzintars has also increased – as of the day VID made its decision, the debt was EUR 6 815 743.17, although initially at the moment of approval of the legal protection plan the debt was EUR 3 457 067.03.

Thirdly, although multiple requests were put in, Dzintars has not submitted cooperation contracts, planned property sale project or other documents that would make it clear the company is able to perform payments outlined in the legal protection plan. At the same time, it was found that the company had failed to complete several requirements of regulations – the company has not submitted its profit or loss assessment with detailed explanations for every position. The company has also failed to submit its annual account for 2018, which would have provided a clear look at the company’s financial state, financial operations and monetary flow.

No evidence was provided that Dzintars has settled its commitments before creditors by the day of announcement of the ruling. The court also received no justified objections about the administrator’s request to the court, explains Mežance.

Diks had previously said that Dzintars’ prepared legal protection process plan’s amendments were not coordinated with creditors. This is why the administrator decided to submit to the court a request for insolvency process.

Dzintars board member Dagnija Maike had previously said that the company’s creditors did not agree to wait until the end of the year, when it is planned to sell the company’s production machinery and use the money from the sale to repay creditors.

«The production plant’s Soviet-era machinery is not needed. This is why it is planned to sell them. One of the possible buyers planned to arrive in November. The sale process itself would take some three months on its own, but creditors decided not to wait,» said Maike.

She adds that Dzintars is able to perform operations within much smaller space. Another option is building a new and more compact production plant.

Maike adds the insolvency process may conclude in remediation. «In any case Dzintars will not go anywhere, because the brand, trademarks and all patents as immaterial property are owned by [the company’s beneficial owner] Iļja Gerčikovs,» she said.

Information surfaced later on that AS Dzintars beneficial owner Iļja Gerčikovs has founded a new company – SIA Dzintars Beauty.

BNN had previously reported that in April 2018 Riga City Pardaugava Court decided to extend Dzintars legal protection process’s term.

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