Proposals of the Ministry of Finance to strengthen the insolvency framework approved
The Seimas approved the draft amendments to the laws prepared by the Ministry of Finance on insolvency of legal persons, bankruptcy of natural persons and the accompanying amendments aimed at strengthening the insolvency framework. According to the Minister of Finance, the changes will establish higher standards of impartiality and transparency, and insolvency proceedings will become clearer and more problem-solving-oriented.
"A credible insolvency framework is a prerequisite for a strong economy, fair competition and public confidence in public institutions. These amendments to the laws will ensure that decisions are taken more efficiently in cases of financial difficulties and that insolvency administrators act according to the highest standards of impartiality and professionalism," Minister of Finance K. Vaitiekūnas states.
The amendments will enter into force from 1 January 2027, with the exception of the provisions providing for the digitalisation of creditors’ meetings, which will apply from 1 January 2028.
Regulation of insolvency of legal persons
One of the most important changes to the Law on Insolvency of Legal Entities is the significant expansion of restrictions on the appointment of insolvency administrators and the strengthening of impartiality requirements. Practice shows that risks of conflicts of interest often arise not directly but through close family or business ties, and therefore stricter requirements will apply to a wider range of persons concerned.
In order to ensure greater transparency in the proceedings, certain transactions will only be able to be concluded by insolvency administrators with the approval of creditors. Such a requirement will apply to the acquisition of services from other insolvency administrators or legal entities affiliated to the administrator, as well as in other cases where there may be a risk of conflicts of interest.
It is also established that an insolvency administrator, who is a natural person, cannot work for more than one legal person. This limitation will reduce the risk of potential biases and conflicts of interest, prevent the possibility of manipulation in selection, while ensuring fairer conditions of competition in the market.
The amendments to the laws extend the range of sanctions imposed on insolvency administrators to include financial penalties. The supervisory authority is also empowered to impose financial sanctions on the Chamber of Insolvency Administrators in the event of improper performance of its functions.
The amendments also strengthen environmental safeguards in the case of unmanaged waste or contaminated soil in the company’s asset structure. In such situations, out-of-court bankruptcy proceedings will not be possible. The court will have to inform the environmental protection authority about each such case, and the court will also approve the amount of waste management costs.
In order to modernise insolvency proceedings, it will be possible to vote electronically at creditors’ meetings via the Insolvency Portal. This will allow for more expeditious decision-making, increase the transparency of the process, reduce the administrative burden and the use of paper documents.
Improvement of bankruptcy processes of natural persons
The amendments waive the requirement to initiate bankruptcy proceedings against a natural person only with a debt of at least 25 MMW. This will allow people in financial difficulties to start bankruptcy proceedings earlier and restore financial stability more quickly.
Changes in administrative liability
In order to promote entrepreneurship and to reduce demotivating factors, it is envisaged to waive administrative liability to the managers of legal entities for failure to submit or late submission to the court of a petition for commencement of bankruptcy proceedings.