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Friday 21.09.2018 | Name days: Matīss, Modris, Mariss

Insolvency Law amendments not intended

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Although a number of required corrections have been found in the Insolvency Law’s new wording, which came into force on November 1, 2010, neither the Justice Ministry (JM), nor the Insolvency Administration have drafted particular law amendments.

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUBaiba Broka, the adviser to the Justice Minister, admits at the moment the JM is looking at how the law works, assessing whether there are any deficiencies or amendments needed.

According to her, the JM has already established the necessity of several amendments and corrections. The JM has identified a number of practical matters, such as those related to tax application and administrators’ salaries. These issues had to be included in the law, yet currently they are not. Possibly, the law objective definition has to be supplemented with lenders’ interests. There are very different opinions that have to be summarized, Broka says.

The JM is currently researching whether it was correct to give up in certain cases the solvency and liquidity assessment, as there were numerous instances indicating that the law is more a debt levy tool, rather than solvency determination.

Also, the Insolvency Administration Deputy Director on legal matters Helmuts Jauja acknowledges that several necessary corrections have been established. As regards the legal persons’ insolvency processes, in some cases corrections are needed to the process itself. While the natural persons’ insolvency processes have several aspects with ambiguous jurisprudence in terms of the taxpayers’ status.

Also Jauja indicates that the issue of what to do, if insolvency proceedings are initiated but the person does not cooperate, is becoming more clearer.

However, he says that no specific corrections are prepared for the Insolvency Law because it is too early to do so. We are noting the problem issues that need to be clarified in the future; however, I think this law should not be amended within a year. It is necessary to wait and see how the further course of events develops, Jauja says.

Broka, however, emphasizes that when adopting any new law, it should be taken into account that inaccuracies will appear, moreover the Insolvency Law was accepted disunitedly already at the time when it was drafted, receiving widespread criticism.

Broka points out that the law conceptually differs from the previous one, for example, with the definition of objectives. Therefore, it should be carefully observed whether the new regulation is justified.

Any legislative act is a result of political compromise. The existing text has been achieved by a combination of different opinions, but it should be noted that it was difficult to foresee in the development process how the provisions of the law will be interpreted, explains the Minister’s adviser.

As reported, on November 1, 2010 the new Insolvency Law entered into force, which was approved by the Saeima, after second revision, on July 26, as well as the amendments to the Civil Procedure Law, stipulating the improvement of insolvency proceedings, reducing the court’s workload and speeding up the case review process at courts.

According to the information provided by the Insolvency Register, in the first three months of this year 296 insolvency proceedings were initiated, of which 139 involved natural persons and 157 – legal persons.

While during last year’s first three months 804 insolvency proceedings were initiated, of which 97 involved natural persons and 707 – legal persons.

Overall, last year 2 812 insolvency proceedings were initiated. Before the new Insolvency Law enactment in October, 445 legal persons’ insolvency proceedings were initiated, but in November and December only 105 proceedings were initiated each month.

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