"Support for debt restructuring in Latvia" project launched

By Axel  Reiserer

Latvia takes next step toward a pan-Baltic capital market

The Latvian authorities have unveiled new steps to bolster insolvency procedures in the country, putting a stronger focus on debt restructuring and cross border insolvencies.

The measures, aimed at further strengthening the overall economy, build on the progress Latvia has already achieved in reforms made within the profession of insolvency practitioners.

Latvia has been investing heavily in helping resolve various issues in the area of insolvency in recent years. The next step is to focus on mechanisms allowing debtors a second chance to rebuild or maintain their participation in economic processes.

To this end, the Ministry of Justice launched a new project on 20 September aimed at strengthening support for debt restructuring and improving the capacity of parties to administer cross-border insolvency proceedings.

The project is funded by the European Union through the Structural Reform Support Programme and is implemented by the EBRD, in cooperation with the European Commission, and with the support of a consortium of financial and legal experts led by PwC Latvia. The project will:

  • identify legislative or implementation issues hindering debt restructuring in Latvia with an in-depth review of existing practices
  • develop strategies and mechanisms to strengthen and encourage the use of debt restructuring at an early stage, including guidelines on best practices in decision-making for businesses in financial difficulties
  • train key stakeholders, namely judges, insolvency practitioners and those supervising legal protection proceedings in debt restructuring and cross-border insolvency
  • raise awareness among the public and private sectors of the benefits of debt restructuring.

As part of the implementation of the project, particular attention will be paid to the existing Restructuring and Insolvency Directive, which is to be implemented by Latvia and other member states of the European Union by 17 July 2021. The objective of this new directive is to contribute to the proper functioning of the internal market and remove obstacles to the exercise of free movement of capital and freedom of establishment, which result from differences between national laws and procedures.

Without affecting workers' fundamental rights and freedoms, the directive aims to remove such obstacles by ensuring that viable enterprises and entrepreneurs that are in financial difficulties have access to effective national preventive restructuring frameworks. The latter will enable them to continue operating; and ensure that insolvent or over-indebted entrepreneurs can benefit from a full discharge of debt; and that the effectiveness of procedures concerning restructuring, insolvency and discharge of debt is improved, particularly concerning time taken.

The project will be carried out over a period of 18 months. Next steps include consultations with public and private stakeholders involved in debt restructuring and a report analysing any necessary areas of reform in the existing debt restructuring framework, including as a result of the directive.