Estonian bankruptcy law gives pledge creditors several advantages over other creditors in bankruptcy proceedings, including the priority to satisfy their claims out of the money received from the sale of the pledged asset in the first ranking of claims. However, uncertainty arises regarding the division of expenses between pledge creditors in cases where a pledged asset has been encumbered with several rights of security.
The Bankruptcy Act allows for a prohibition on business for the duration of bankruptcy proceedings regarding both natural and legal persons. However, since the act is broadly worded and it is unclear for what purpose a prohibition on business may be applied with respect to a board member, and what restrictions limit the application of such prohibition, the Supreme Court has attempted to fill the legal gap.
If a company becomes permanently insolvent, the management board must promptly submit a bankruptcy petition for the company to a court. If the bankruptcy petition is not submitted on time, company board members risk both civil and criminal liability. Thus, to ensure all obligations have been met and board member liability is excluded, the main issue is how to determine whether a company is permanently insolvent.
The nature of the liability of a company board member in situations relating to insolvency is complex. Filing a bankruptcy petition in a situation where a company could still be saved may make the board member liable to the company; however, if the board member fails to file a bankruptcy petition on time, he or she could be liable to the company, as well as its creditors. The Supreme Court recently set out its position on the matter.
The Debt Restructuring and Debt Protection Act aims to help natural persons who are experiencing financial difficulties. The act complements the Reorganisation Act, which fulfils a similar function for businesses. Since the acts entered into force, other legal policy measures have been suggested for the swift non-judicial reorganisation of businesses facing financial problems.
Estonian bankruptcy law, in line with that of many other countries, offers greater protection and rights to creditors whose claims are secured by a pledge. In bankruptcy cases involving pledged creditors, concern often arises in relation to the circumstances under which a pledgee may contest the final report on the bankruptcy proceedings. The Civil Chamber of the Supreme Court has analysed this issue in a recent ruling.
The Civil Chamber of the Supreme Court recently issued an important ruling on the recovery provisions in the Bankruptcy Act. The court interpreted the recovery provisions contained in the act and explained the presumptions of possible recovery in the event of a payment made by a bankrupt party to a third party.
The Insolvency – Just Bankruptcy? conference, dedicated to the 15th anniversary of the Estonian Bankruptcy Act, was held recently. The conference looked both back on the development of insolvency law in Estonia over the last 15 years and forward to its future.
Bankruptcy proceedings start when a bankruptcy petition is filed. Such a petition may be filed by either the debtor or the creditor. In practice, it is usually a creditor which files a bankruptcy petition, and that petition must comply with the requirements set forth by Section 10(1) of the Bankruptcy Act.
Pursuant to Article 280 of the Property Act, the claims secured by a pledge shall be preferred to all other claims with respect to the pledged property. Consequently, in case of insolvency the pledgee's claims are subject to satisfaction before the claims of other creditors.
Including: Bankruptcy Act; Instigation of Bankruptcy Proceedings; Consequences of Declaration of Bankruptcy; Submission and Defence of Claims; Sale of Bankruptcy Estate and Granting of Claims; Personal Liability of Shareholders and Board of Directors; Reorganization Proceedings.
Parliament has ratified the new Bankruptcy Act, which was introduced in order to harmonize the regulation of bankruptcy law with recent private law reforms. The new act increases supervision of bankruptcy trustees, accommodates differences in bankruptcy proceedings involving individuals and amends the ranking of claims.
Claims against a bankrupt insurance company arising from insurance contracts have priority under Article 65(3) of the Credit Institutions Act. This is an exception to the general principle of property law, which dictates that claims secured by pledge are preferred to all the other rights in relation to the pledged property.
Including: Background; Proceedings; Authorities; Debtor's Obligations; Formation of Bankruptcy Estate; Claims; Administration of Estate; Protection of Employees' Interests; Liability; Compromise
Claims recognized in bankruptcy proceedings are satisfied according to priorities of distribution. However, this contradicts the underlying principle of bankruptcy law, namely the equal treatment of all creditors. Accordingly, relevant amendments are being introduced and will take effect on January 1 2003.