Klaipėdos administratoriai, represented in court by our team, won a dispute over its removal from the post of bankruptcy administrator. The Lithuanian Court of Appeal found that a creditor seeking to remove our client did not have the right to apply for the administrator’s removal because its claim was less than the minimum amount set by law. The Court of Appeal overturned a decision of the first instance court to remove our client as bankruptcy administrator, closed the case and formed important case law as regards removal of bankruptcy administrators.
New case law – minor creditor cannot initiate removal of bankruptcy administrator
In 2012 the Lithuanian Enterprise Bankruptcy law established the right for a creditor (or creditors) to apply directly to the court for removal of a bankruptcy administrator if the court-approved creditor’s claim amounts to more than half of the total amount of the creditors’ claims in bankruptcy proceedings. Despite changes in legal regulation in 2012, until now there had been a practice whereby a minor creditor could inform the court about improper performance of duties by an administrator, and the court assessed the information on its own initiative.
The decision by the Lithuanian Court of Appeal in this case eliminated the contradiction and established the practice corresponding to legal requirements. The Lithuanian Court of Appeal found that an individual creditor whose claim is less than half the amount of claims approved by the court may not initiate court proceedings for removal of the insolvency administrator for improper performance of duties. Moreover, the court found that if information about the activities of a bankruptcy administrator is submitted by a minor creditor, the court cannot assess it and must terminate proceedings for removal of the bankruptcy administrator.