News

RASK partner and head of bankruptcy and insolvency Tarmo Peterson participates as an expert in compiling a state-commissioned analysis of the potential for making insolvency proceedings more efficient in Estonia. This extensive analysis is related to a revision of the Reorganisation Act carried out by the Ministry of Justice and will serve as a basis for new amendments to the act.

A number of problems have arisen with insolvency proceedings in practice and reorganisation often fails to achieve the expected goal. For example, applications for reorganisation tend to be submitted too late, when the insolvency of the company is no longer temporary and sustainable management may not be possible even after the reorganisation. Other problems include the insufficient information available to creditors concerning difficulties with solvency, the fact that inappropriate claims and claims of related creditors are included in reorganisation plans, and the general stigmatisation of companies experiencing insolvency, which reduces debtors’ motivation to implement reorganisation measures early on. It should be noted that these problems are also common to restructuring proceedings in other jurisdictions.

In addition to the above, Estonia needs to incorporate the European Parliament and Council Directive of June 2019 on new preventive restructuring frameworks, discharge of debt and disqualifications, and measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt.

The analysis of insolvency proceedings commissioned by the Government Office will help the government to discuss the potential for making insolvency frameworks more efficient in accordance with the EU Directive and to develop an appropriate new legal framework.