On 18 March 2021, the Latvian Parliament adopted amendments to the Latvian Law on the Suppression of Consequences of the Spread of COVID-19 Infection (“the Latvian Covid-19 Law”) that provide for a further extension of the insolvency moratorium.
Suspension of creditors’ right to file for insolvency
- Pursuant to the amendments to Article 22, Paragraph 1 of the Latvian Covid-19 Law, any creditor (including an employee or the tax authorities) is precluded from filing an insolvency application against a debtor (that is a legal entity) until 1 September 2021.
- The moratorium applies to any creditor-debtor relationship, and hence is not limited to one particular industry or only to debtors facing financial difficulties specifically due to the outbreak of the COVID-19 virus.
- A creditor cannot file for insolvency against a debtor, even if the debtor has failed to meet its debt obligations towards the creditor.
Suspension of the obligation of the management board to file for insolvency
- In accordance with the amendments to Article 22, Paragraph 2 of the Latvian Covid-19 Law, the obligation of the management board of a debtor – that is a legal entity – to file for insolvency against the debtor (i.e., for the debtor to file for insolvency against itself) if the feature of insolvency proceedings for a legal person referred to in Article 57, Paragraph 5 of the Latvian Insolvency Law applies – that the debtor has not repaid debts which have been overdue for more than two months – is suspended until 31 December 2021.
- The obligation of the management board to file for insolvency still applies nonetheless if the debtor has not fully remunerated an employee for work, or has not paid compensation for damages in connection with an accident at work or an occupational disease, or has not made the mandatory social insurance payments within two months of the day specified for payment.