Rūdolfs Eņģelis Partner rudolfs.engelis@sorainen.com
	Eva Berlaus Office Managing Partner eva.berlaus@sorainen.com
	Ģirts Rūda Partner girts.ruda@sorainen.com

As of the evening of 21 November, the operations of Latvijas Krājbanka (Krājbanka, in mid-2011 the fifth largest bank in Latvia by deposits and the 10^th largest by assets) have been suspended. The previous management of the bank has been removed and the bank is currently managed by authorised representatives appointed by the Financial and Capital Market Commission (FCMC). The bank’s further fate is not yet known.

Starting from 23 November, depositors can receive payments in cash up to LVL 50 (approx EUR 70) a day each. Soon the FCMC must decide on payment of guaranteed amounts to depositors from the guaranteed deposit fund. The law provides that depositors will be allowed to receive back a sum equivalent up to EUR 100,000 of their deposit, and this payment should be made within 20 business days as of Tuesday, 22 November (the law allows extension of up to ten business days). Both natural persons and legal entities who are depositors may apply for payment. Likewise the law sets a few limitations, for example, subordinated deposits and deposits of the bank’s management and specific managerial level employees are not covered by this guaranteed payment.

On 1 January 2011, amendments to the law came into force increasing the guaranteed amount of deposits from the equivalent of EUR 50,000 to EUR 100,000. A year ago the guaranteed amount would have been half the size it is today.

What should be taken into account?
These negative developments in relation to Krājbanka will undoubtedly cause difficulties to many people and companies. Today, when recovery of the state economy so much depends on successful operation of businesses and their ability to pay taxes and create and maintain jobs, businesses must protect themselves from adverse consequences that can be caused by bank crashes. Here are some significant, yet ordinary aspects for your immediate attention:

1. if your company has held funds in Krājbanka and the present situation causes difficulties in cash flow and obstructs performance of current obligations – please check whether the respective contracts let you negotiate and amend terms of cooperation with your counterparties and whether lack of funds in hand would cause immediate risk of insolvency (for example, relations with the financing bank, the SRS, providers of public utilities or your main cooperation partners); remember that under Latvian law the right to file an insolvency application arises if your debt exceeds LVL 3,000 (approx EUR 4,270) and it is not settled within three weeks after receipt of written notice;
2. whether your company accounting systems have suspended all payments to accounts in Krājbanka, both to your counterparties and your employees;
3. if your counterparties are unable to perform their liabilities towards you because Krājbanka operations are suspended, check whether you may decrease your exposure to this counterparty under contractual provisions or whether you may suspend further supplies due to the transaction partner’s increased credit risk;
4. if your transaction partner may become insolvent due to the consequences caused by Krājbanka or wishes to initiate legal protection proceedings, check whether you can act sufficiently quickly and protect your business interests in this situation.

SORAINEN attorneys and lawyers are ready to help you in assessing the likely risks and provide solutions for protection of your business. In case of questions please contact partners Rūdolfs Eņģelis, Eva Berlaus, Ģirts Rūda or your contact person at SORAINEN.