On 23 December 2020, 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 changes to the regulation of insolvency proceedings came into force.
Reimposed 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 March 2021. It must be noted that a similar prohibition also existed from 12 March 2020 until 1 September 2020.
- The moratorium applies to any creditor-debtor relationship and hence is not limited to any particular industry or just to debtors facing financial difficulties specifically due to the outbreak of the COVID-19 virus.
- A creditor cannot file for insolvency against the debtor prior to 1 September 2020, even if the debtor fails 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 of a legal person referred to in Article 57 Paragraph 5 of the Latvian Insolvency Law applies – that the debtor has not honoured obligations which have been overdue for more than two months – is suspended until 1 March 2021.
- The management board’s obligation to file for insolvency still applies nonetheless if the debtor has not paid an employee in full remuneration for work, or 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.