Lithuania: President initiates amendments to Law on Bankruptcy.
From January of this year bankruptcy administrators in Lithuania are selected using a computer algorithm. The necessary amendments to the Law on Bankruptcy („the Law”) were initiated by the President with the aim of guaranteeing more transparent and faster bankruptcy proceedings.
At the beginning of February the President submitted to the Parliament another draft amendment to the Law. The aim of the draft is to ensure that bankruptcy proceedings are initiated in time and dealt with effectively and adequately in order to protect the interests of the bankrupt company and its creditors.
The main amendments proposed to the Law are as follows:
- To set a deadline to apply to the court for those entitled to initiate corporate bankruptcy proceedings. The President has proposed a term of one month. The current version of the Law does not set a time limit, so that bankruptcy filings are often too late, leaving a bigger share of unsatisfied creditors.
- To establish that the bankruptcy administrator can claim compensation for damage arising due to failure to file (or late filing) for bankruptcy. Compensation would be recoverable from those entitled to initiate insolvency proceedings (e.g., the company manager or owner). The current version of the Law does not set a specific person who can claim compensation.
- To allow property not sold at two auctions to be sold under the procedure laid down by the creditors meeting but only to the same extent and level of detail of what was proposed during the auction. Otherwise, it must be sold at auction. This aims to prevent sale of the property under less favorable conditions (e.g., a very high price for the property is established) where the auction does not take place.
- To establish minimum and maximum levels of bankruptcy administration costs, including the salary of the bankruptcy administrator, as well as a calculation and payment procedure for these costs. The proposal is to link the remuneration of the administrator to performance results, as opposed to the duration of the bankruptcy proceedings, thus not involving a monthly salary for the bankruptcy administrator.
The draft Law has just been submitted to the Parliament for consideration so it can be modified before adoption.
Source: TAR, 2015-02-04, Nr. 1738.