As at 30 January 2018

by Edvīns Draba
Associate at SORAINEN, Riga

Proceedings Elements of the Directive already included into the national legislation
Tiesiskās aizsardzības process
Main features:
In-court corporate restructuring proceedings. Confirmation by the court of an advanced negotiated restructuring plan (where there are dissenting minority creditors)
Includes a sub-category - ‘Ārpustiesas tiesiskās aizsardzības process’, which are out-of-court restructuring proceedings
Article 5 – the debtor remains in possession of its assets and affairs. A person supervising legal protection proceedings is always appointed. However, in the context of the Draft Directive Proposal this can be justified by the fact that legal protection proceedings will always fall under exceptions mentioned in Article 5 (3).
Articles 6 and 7 – partially included except Paragraph (5) of Article 7. In addition, it should be noted that the debtor is not required to file for insolvency if an agreement on a restructuring plan is not reached. However, the court shall terminate legal protection proceedings and commence the insolvency proceedings, if legal protection proceedings have been initiated in respect of a debtor for the second time in a year, but the implementation of the legal protection proceedings has not been commenced (one of the reasons might be the lack of agreement on the restructuring plan with the creditors).
Article 8 – partially included except that no model restructuring plan has been made up to date.
Article 9 – partially included except that shareholders are not entitled to vote on the restructuring plan. The creditors are divided into two classes – secured and unsecured.
Article 10 – included.
Article 11 – not included as the restructuring plan must be adopted by both classes of creditors (unsecured and secured creditors).
Article 12 – no specific provisions included. Technically the decision to pursue restructuring or to file for insolvency is adopted by the management board of the company.
Article 13 – Not included. Although its customary to attach a debtor’s balance sheet to the restructuring plan, no external valuation of the debtor’s business is required.
Article 14 – Included.
Article 15 – Not included as the decision on the commencement of legal protection proceedings cannot be appealed.
Articles 16 and 17 – partially included. No specific provisions governing voidability/ unenforceability of transactions, as well as exemption from civil, administrative and criminal liability.
Article 18 – partially included. There are no specific provisions regulating the duties of the management board and/or supervisory council of a company in the vicinity of insolvency. There is a general regulation setting forth the duty of care towards the company. The management board and the supervisory council do not have an obligation to serve the interests of the creditors.
Proceedings Elements of the Directive which may be included into the national legislation
  Currently no discussions are taking place within the authorities in charge of the restructuring and  insolvency policy in Latvia.