Bankruptcy procedures in Estonia fall under the regulations of Bankruptcy Act that was established in December 1996 and enforced in February 1997. The Estonian Bankruptcy Act focuses on the protection of the debtors and creditors’ rights. According to the Act, bankruptcy proceedings in Estonia can be compulsory, in which case a court will decide to commence the procedures for debt collection, or voluntarily by company reorganization. Bankruptcy according to the Bankruptcy Law is defined as the satisfaction of the creditors’ claims from de debtors’ assets.
If an Estonian company goes bankrupt, a court will issue a ruling declaring the company’s insolvency. If the company is over in-debt and the company’s equity is negative a petition for bankruptcy must be filed. The bankruptcy procedure will be executed by the court through a trustee. When bankruptcy is declared the management of an indebt company is transferred to the trustee.
The first step when commencing Estonian bankruptcy procedures is the hearing of the actions that led to this situation. The hearing will take place in an Estonian County Court. The petition for bankruptcy can be filed by the creditors or by the debtors themselves. The petition can be approved or dismissed within ten days after its filing. The creditors’ claims will be satisfied through assets transference or company reorganization.
Once bankruptcy is declared, the company will keep its name with the mention bankrupt in the title. In certain cases the court may decide to prohibit one or more persons in the company to participate in the company’s management. All information about the bankruptcy procedures will be published in the Estonian Official Gazette.
Compulsory dissolution for private and public limited companies will be executed through a court order. Before the initiation of the insolvency procedure the court may set an additional timespan for the company to eliminate the causes leading to dissolution.
In order to start restructuring or reorganization proceedings for the avoidance of bankruptcy in Estonia, companies must file an application with the court. The application will contain proof of possible insolvency in the future and the company’s management structure after the restructuring proceedings. Also, a list with the debt and a financial report must be submitted with the application. If the court agrees with the reorganization of the company, the suspension of the company is applied.
Reorganization proceedings mean the appointment of a restructuring advisor by the court that will supervise and make recommendations to the company during the reorganization period. A company is allowed 60 days to elaborate and submit a restructuring plan with the court. The plan must be approved by the creditors and the court.
You can contact our law firm in Estonia for specific details about company reorganization in order to avoid bankruptcy. Our Estonian lawyers can also provide legal assistance in other legal matters and litigation cases.
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