Creditor protection in insolvency proceedings will increase next year
President Gitanas Nausėda signed the amendments to the Law on Insolvency of Legal Entities and related legal acts prepared by the Ministry of Finance and adopted by the Seimas, which will give creditors more opportunities to control insolvency proceedings. The amendments aim to ensure greater transparency and better protection of creditors' interests.
"Insolvency proceedings must be based on transparency and clear liability. These changes will give creditors more opportunities to monitor insolvency proceedings, participate in key decisions and defend their interests more effectively," Minister of Finance K. Vaitiekūnas states.
According to the Minister, the adopted amendments will enter into force as early as next year, and as of 1 May 2028, insolvency proceedings will be supplemented with a new digital tool – electronic voting of creditors via the Insolvency Portal.
More information and greater transparency
One of the most important changes is the expansion of the information published on the Insolvency Portal. Creditors will be able to obtain more expeditiously data on the progress of insolvency proceedings, the sale of the assets of the bankrupt company, the movement of funds, the transactions under way and the actions of the insolvency administrator.
Greater availability of information will allow earlier detection of possible violations, more effective defence of one's own interests and will strengthen trust in the insolvency proceedings.
Creditors will have greater influence on important decisions
The amendments to the law provide more safeguards for situations where conflicts of interest may arise or the interests of creditors may be violated.
Next year, certain decisions cannot be taken without the knowledge and approval of creditors. The involvement of creditors will be necessary when deciding on transactions with related persons, the sale of assets of a bankrupt company to its former owners or managers, as well as in cases where the debt of the former manager or owners to a bankrupt company would be reduced or waived.
These changes are expected to reduce the risk of abuse and help ensure that the company's assets are realised to the maximum benefit of creditors.
Easier to make decisions electronically
The amendments also provide for further digitalisation of insolvency proceedings. Creditor voting will be transferred to the Insolvency Portal, allowing creditors to participate in decision-making regardless of their location.
According to the Ministry of Finance, this will help to increase the activity of creditors, reduce the administrative burden and allow faster decision-making. Currently, about 2.9 thousand creditors' meetings are held in Lithuania every year, where about 50,000 creditors participate, therefore, digital solutions will significantly contribute to the efficiency of the process.
Increased accountability of insolvency administrators
The law also provides for stricter requirements for the impartiality, responsibility and accountability of insolvency administrators.
The mechanisms for the prevention of conflicts of interest are being expanded and there are more cases where administrators cannot be appointed to administer proceedings due to possible links with the insolvent company or its participants. Supervision of administrators’ activities and disclosure requirements are also strengthened.
Creditors will have more opportunities to monitor the actions of the administrator and assess whether the process is conducted in a fair, impartial and efficient manner.
Faster settlement with collateral holders
The amendments to the law establish a clearer procedure for settling accounts with collateral holders. After the sale of the pledged assets, the minimum amount of funds due to the collateral holder will have to be transferred within the set deadline, regardless of whether a final decision has already been taken on all the costs of administering the bankruptcy proceedings.
This amendment will make collateral holders’ claims more expeditious and reduce the possibility of settlement delays.