Information processor: Insolvency Administration

Information Published: 31.07.2017.



In accordance with the Insolvency Policy development guidelines for the action plan 2016. -2020, the Insolvency Administration has prepared information on the need for timely submission of legal protection process an application to restore the company’ s solvency.

Informative material provides an explanation on how to deal with legal persons that are now facing financial difficulties and as the legal protection process can help to resolve these issues.


Legal protection process and the changes in the framework

What is the legal protection process?

Legal protection proceedings means a procedure which allows the integrity of the debtor in financial difficulties, the ability to restore its solvency on Insolvency Law in protection means and methods.

For reasons of legal protection process, based on the debtor's application, proposes that the court.

As the legal protection process may be assisted by the debtor?

After the decision to initiate legal protection process:

  • stops processing the enforcement of judgments against the debtor;
  • secured creditor of two months after initiating the procedure may not require the sale of the pledged property of the debtor;
  • creditors shall be prohibited to submit an application for the debtor's insolvency proceedings;
  • stops penalty and interest exceeding the mandatory, and late charges, including tax increases in claims for late payment.

Or the debtor is obliged to provide legal protection process, since the beginning of the financial difficulties?

No, unlike the legal person insolvency proceedings submission of applications (in case there is a iestājušas Insolvency Law of the signs), the legal protection process is the debtor's choice for the submission of applications.

Once financial difficulties, the debtor to assess whether the financial difficulties grade does not preclude the possibility of negotiating with creditors out of court proceedings on whether the debtor is required to provide legal protection process an application for restructuring the judicial protection.

How much is it?

The State fee for legal protection process submission of applications is 142, 29 euro.

What happens after the initiation of legal protection process?

After legal protection was the debtor within two months shall be drawn up by the legal protection process measures plan, which shall be co-ordinated with all creditors, a harmonised legal protection process plan of measures shall be submitted for approval by the court.

Judicial protection measures plan further action strategy for the debtor shall be limited solvency position. As a method to restore the solvency of the debtor may select any method that will help restore solvency, for example:

  • postponing the execution of payment obligations;
  • the reorganisation, etc.

N.B. Despite the fact that the primary legal protection process is started, the debtor's interest in the long term benefit of the implementation of legal protection process must also be creditors. Consequently, one of the basic principles of legal protection process is that legal protection process must not include methods for the action plan, which limits the interests of creditors more than is necessary to restore the solvency of the debtor.

Or the legal protection process initiation of proceedings means that the debtor will be an appropriate legal protection process?

Legal protection proceedings the debtor will apply only if the legal protection process, a plan of measures to harmonise creditors and legal protection process will agree with the implementation of the court.

What happens after the adoption of the implementation of legal protection process?

After legal protection of the implementation of the debtor to comply with harmonised legal protection process measures plan, as well as comply with the Insolvency Law of the restrictions, thus acting in the interest of creditors.

In case the debtor fails to fulfil, or is no longer able to comply with legal protection process measures plan, as well as if the debtor fails to comply with the Insolvency Law in certain behavioural constraints is delivered at a legal person insolvency proceedings.

In case the debtor fulfils the legal protection process measures plan, its solvency is being restored to the full extent.

What has changed the legal protection process framework from 2017 July 1 July?

From 2017 June 1 July, the entry into force of the Insolvency Law and Civil Procedure Act amendments with which the made changes to the legal protection process framework, the introduction of legal protection process supervising persons (hereinafter – the supervising party) Institute and the free market principle.

framework with regard to changes in the process of legal protection, including for monitoring the personal identification, shall enter into force on 2017 December 1. in July and is applicable to legal protection proceedings initiated after 2017 June 1 July.

The entry into force of the aforementioned regulatory framework, namely, legal protection proceedings initiated before 2017 July 30 June, the legal protection process, the court appointed insolvency proceedings administrator (hereinafter – the administrator) on the recommendation of the debtor or of the Insolvency Administration. While from 2017 July 1. the process of legal protection the court will appoint a supervising persons upon the recommendation of the majority of creditors.

This Law shall be increased regulation of the vendor role in the process of legal protection, as well as provides the ability to freely choose the legal protection process monitoring activities. Thus, the legal protection process compliance with the court approved plan detailing the legal protection process will provide a majority of the selected and approved by the court supervising the person. The majority has the right of creditors of the supervising persons at any time change. In order to enable the debtor to restore solvency, if they cannot agree on a supervising party candidate from the candidates chosen it is true.

The supervising persons can be any natural person with the capacity to act, which has the right to reside and be employed in Latvia all legal protection process and is not covered by the time of occurrence within the limits provided for in Insolvency Law. On a supervising persons specified in the process of legal protection cannot be a person covered by any of the legal criteria, for example, to serve as a supervising persons as a restriction on the specific legal protection process is the fact that the person involved in the elaboration of legal protection process measures, etc. (Insolvency Law 12 of Article3 ).

An opinion regarding the legal protection process in accordance with the requirements of law shall provide a plan of measures for supervising the person. In the case of legal protection process measures plan in the conciliation process, the debtor has not taken into account the objections of creditors, the opinion of these objections shall provide independent sworn auditor, the activities of which are to be borne by the creditors whose claims are not taken into account. After the legal protection process for the delivery of a person shall monitor the implementation of the supervising the implementation of legal protection process measures, notifying vendors at their request, shall examine complaints and conduct other activities prescribed by law.

In the interests of creditors, including the protection of interests of minority creditors, uzraugošajai person has a duty to register with the State Revenue Service as a performer of economic activity specified in regulatory enactments regulating the field of taxation prescribed by the State Revenue Service to declare the place of practice in Latvia. Also provides for the monitoring of personal responsibility for the losses that were her fault that caused the country, the debtor, creditors or other persons. In order to cover potential losses, supervising the person may be to insure their civil liability, if the supervising party deem it necessary or requested by the majority of creditors.

monitoring persons are obliged to maintain their records, as well as their revenue and expenditure incurred in carrying out the views of the person supervising the duties of office. Similarly, within the parties, as well as administrators, provides for disciplinary responsibility.