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Lithuania draws on CERIL recommendations on COVID-19 insolvency legislation

Vilnius

Lithuania draws on CERIL recommendations on COVID-19 insolvency legislation

The outbreak of COVID-19 has urged legislators all over the world, including Europe to take immediate action, also with respect to matters of restructuring and insolvency law. In Lithuania, the Judicial Council published a statement on 21 April  2020 calling for adequate measure, adopting recommendations that were before proposed in March 2020 by the Conference of European Restructuring and Insolvency Law (CERIL).

CERIL Executive Statement

In March 2020, CERIL published it’s CERIL Executive Statement 2020-1 on COVID-19 and insolvency legislation. In light of the urgent need to act, the statement was prepared by Prof. Stephan Madaus (Halle-Wittenberg) and Prof. Em. Bob Wessels (University of Leiden) (Reporters), assisted by Gert-Jan Boon (Research Associate ), in addition to the other members of the Executive.

With the COVID-19 (corona) virus reaching pandemic status, CERIL took note of the devastating effects that the healthcare measures have on businesses. The CERIL Executive calls upon EU and European national legislators to take immediate action and adapt insolvency legislations where necessary in light of the current extraordinary economic situation and to prevent unnecessary bankruptcies of entrepreneurs.

Stability of Economy in COVID-19 Times

In response to the outbreak of the COVID-19 virus, the Lithuanian Judicial Council and adopted a resolution urging the Lithuanian government to initiate amendments to its insolvency law by suspending the application of certain provisions, in particular, the obligation of directors to initiate insolvency proceedings in case the insolvency was caused by COVID-19 crisis.

In an accompanying press release, the Judicial Council makes explicit reference to and highlights the alignment of its proposals with the CERIL Executive Statement 2020-1 (freely translated, with thanks to Justice Rimvydas Norkus, CERIL Conferee):

‘The Judicial Council proposes to adopt a moratorium to the obligation of companies' directors to initiate insolvency proceedings.

Today, on the 27th March, the Judicial Council in expression of its solidarity with the State and society fighting with pandemic COVID-19 and with a view of helping to guarantee the stability of economy in this period, submitted proposals to the Government of Lithuania to initiate amendments to Lithuanian Insolvency Law in order to suspend application of its certain provisions (moratorium).

The president of the Judicial Council Algimantas Valantinas underlines that strict measures of the fight against COVID-19 will have gravely negative consequences on certain sectors of the economy. In respect of impact of the business for the stability of the economic life of the country, we propose that in this difficult period the provisions of the Insolvency law related with the obligation of directors to initiate insolvency proceedings and the right of creditors to apply for insolvency of their debtors be suspended.

Such a solution is also proposed by the Conference of European Restructuring and Insolvency Law.’

On 21 April 2020, the Lithuanian legislator adopted the ‘Law on the application of the consequences caused by COVID-19 to the Law on Insolvency of Legal Persons’ (‘Lietuvos Respublikos naujojo koronaviruso (COVID-19) sukeltų pasekmių poveikio Lietuvos Respublikos juridinių asmenų nemokumo įstatymo taikymui įstatymas’). The law puts forward several amendments, including suspending of the director’s duty to file for insolvency, as well as restricting the right of creditors to initiate insolvency proceedings.

CERIL remains spearheading unique independent perspectives on significant long-term improvements in restructuring and insolvency systems across the European Union.

 

For the full text of the Lithuanian Judicial Council’s press release, see here.

For the full text of the Law of 21 April 2020, see here.

For the CERIL Executive Statement 2020-1 on COVID-19 and insolvency legislation, see here.

 


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