INSOL Europe/LexisNexis coronavirus (COVID-19) Tracker of Insolvency Reforms—Estonia

INSOL Europe/LexisNexis coronavirus (COVID-19) Tracker of Insolvency Reforms—Estonia

We look at the reforms to the insolvency law of Estonia prompted by the coronavirus (COVID-19) pandemic. Written by Signe Viimsalu of SiGN9 OÜ, Tallinn, Estonia. Member of INSOL Europe.

Proposed reforms to insolvency law

The Estonian legislator has adopted multiple laws related to the COVID-19 situation and there is one amendment which is directly linked to insolvency law.

Currently this amendment awaits the President’s approval to be enforced. So, the Parliament has passed it already (ie it is Act), but the President has yet to announce it. She has 14 days to do so or send it back to the Parliament with the reasoning that it is against Estonian Constitution. If the Act is announced, it will be in force retrospectively from 12 March 2020 when the extraordinary situation in Estonia was declared.

The Estonian Bankruptcy Act has been amended as follows—new paragraph added § 193 secunda:

‘Suspension of deadlines about the obligation to submit a bankruptcy declaration / insolvency application (by the debtor) and about deadlines stipulated in §§ 110–114 of the Bankruptcy Act during the extraordinary situation since 12 March 2020

(i) If the law stipulates the obligation to submit a bankruptcy declaration/insolvency application, this deadline is suspended/postponed during the extraordinary situation and ends two months after termination of the extraordinary situation in Estonia.

(ii) Deadlines stipulated in §§ 110–114 of the Bankruptcy Act will also be suspended/postponed during the extraordinary situation plus two months after termination of extraordinary situation in Estonia (similarly to provision (1)).’


Comments

If the ‘law’ means not only Bankruptcy Law, but also the Commercial Code, General Civil Law Act, Act on Foundation or Non-Profit Organisation etc, then other acts related to the usual obligation for the members of the management board to submit an insolvency application to court within 20 days of insolvency situation (very similar to German law) may be covered.

§§ 110–114 of the Bankruptcy Act stipulate deadlines for claw-back actions to be initiated in normal circumstances.

To conclude, all deadlines related to the obligation to submit insolvency applications and deadlines related to claw-back actions (usually with strict deadlines for speedy bankruptcy procedures) are postponed during the extraordinary situation plus two months from termination of that situation.

There is a moratorium for all debtors during these extraordinary times +60 days, which cannot be attacked by creditors during the crisis.

In Estonia, the obligation to submit an insolvency application by the debtor is valid for all legal entities except the state and municipality as they cannot act as bankruptcy debtors. Of course, if the debtor itself chooses to declare bankruptcy (ie send an application to court), it is allowed to do that itself.

INSOL Europe/LexisNexis COVID-19 Tracker of Insolvency Reforms

A tracker of insolvency reforms globally produced by Lexis Nexis in partnership with INSOL Europe is now available: Coronavirus (COVID-19) Tracker of insolvency reforms globally.

We look at various countries worldwide which are expediting reforms to their restructuring and insolvency laws, temporarily suspending onerous insolvency law provisions, increasing limits for statutory demands, suspending enforcement powers and introducing other measures to deal with the COVID-19 crisis. As the situation is rapidly evolving with more countries adding new measures daily, you should contact local lawyers in the relevant jurisdiction to check the current measures in force.

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.