On Thursday, 22 December, the Saeima adopted in the third and final reading a law establishing stricter supervision of the work of insolvency administrators, as well as introducing free-market principles in the legal protection process.
This is part of a wider reform of the insolvency proceedings currently prepared by the Legal Affairs Committee of the Saeima in cooperation with the Ministry of Justice and other stakeholders, indicated Gaidis Bērziņš, Committee Chairman. He pointed out that these amendments to the Law included items related to the supervision of insolvency administrators that have been agreed upon with the Insolvency Issues Advisory Board and also supported by representatives of the Employers’ Confederation, the Association of Commercial Banks and the Foreign Investors’ Council. "The Committee will continue to work on other issues requiring a wider debate, given that the stakeholders hold diametrically opposing views, for example, with regard to the responsibility of board members for failure to submit in a timely manner an application for insolvency proceedings,” noted Bērziņš.
The amendments put forward by the Legal Committee change the model for monitoring insolvency administrators. Qualification testing of administrators is delegated to the state; moreover, requirements for administrator qualification, reputation and professionalism become stricter, and regular examination of administrators is introduced. Compliance with qualification requirements will be checked every two years. At the same time, the range of persons entitled to monitor the legal protection process will expand significantly, granting this right to any legally capable natural person not subject to statutory limitations.
The rights to train prospective administrators will be transferred to the Insolvency Administration and other legal entities, so that the administrators’ professional body will also be allowed to continue fulfilling this task.
An excellent reputation will be an essential prerequisite for administrators. An independent examining board will evaluate the candidate's possible non-compliance with this requirement.
Disciplinary responsibility of insolvency administrators is also introduced. Disciplinary action will be taken both for significant or systematic violations of laws and regulations and for serious breaches of professional ethics. The Disciplinary Commission will be able to apply disciplinary sanctions and initiate dismissal of an administrator.
The new regulation gives creditors more clout in the legal protection process; it also provides an opportunity to freely choose a person to monitor the legal protection process.
To make sure that the legal protection process complies with the legal protection plan approved by the court, a specific person will be chosen by the majority of creditors and approved by the court. The majority of creditors will have the right to replace the person supervising the legal protection process at any time.
The amendments also introduce an electronic insolvency monitoring system, which will aid the Insolvency Administration to perform its tasks and promote the exchange of information between those involved in insolvency proceedings.
The amendments to the Insolvency Law will come into force on the day following its promulgation.
Saeima Press Service