Yesterday at an Outlook seminar to discuss insolvency issues, the governance and the efficiency of the insolvency system was addressed. For the first time, a broad and diverse coalition of organizations – AmCham, FICIL, the Association of Commercial Banks of Latvia, the Latvian Chamber of Commerce and Industry and Transparency International Latvian chapter Delna – came together to advocate for reform of the insolvency system in order to provide confidence in the security of both foreign and local investments.
In order to meet the goal of preventing the abuse of the insolvency system, which undermines new investments and negatively affects the overall business environment, the following conclusions were drawn:
- The current state of affairs seriously impairs the business and investment environment. Formal legislation changes alone cannot solve the problem. The priority, instead, should focus on law enforcement and the assessment of the work of administrators.
- Law enforcement is critical to discourage people from abusing the insolvency process. Many case studies show that the current situation is intolerable and seriously damages Latvia’s business and investment environment. Therefore it is necessary to identify, investigate and hold accountable those persons abusing the insolvency proceedings.
- In order to increase the reliability and credibility of the institute if insolvency administrators, their status and responsibilities should be clarified. There should be stricter governance mechanisms such as the status of government officials , certification given back to the state and/or other tools that can help motivate the administrators to honor their obligations.
- To achieve the above goals, cooperation among government, private sector and NGOs is necessary.
In an indicative survey the business community voiced its concerns about the credibility and the efficiency of the insolvency system. According to the questionnaire conducted by the organizers, 77% of 138 respondents have encountered the insolvency or bankruptcy protection proceedings in their business. 83% admitted their distrust in the ability of state institutions to effectively protect legitimate interests of businesses in the case of insolvency, while 76% consider that insolvency proceedings are not fully transparent and fair. The business people also indicated low trust in all institutions involved in governance and supervision of the insolvency process.
The Minister of Justice Janis Bordans stressed that formal changes in legislation are not enough to address existing problems and confirmed his willingness to continue with reforms to improve the insolvency system. The Ministry of Justice has proposed to change the status of insolvency administrators, to delegate the certification of administrators to the State Agency the Insolvency Administration, to create one list of insolvency administrators ensuring random assignment of cases and to provide effective examination of complaints about administrations during the process. Commenting on case studies presented by Helmuts Jauja, Bordans stated: “Illegal and criminal actions when millions are defrauded appear to be coordinated actions conducted by several highly qualified and knowledgeable, yet unethical persons.”
On November 28 AmCham and its partners – the Association of Commercial Banks of Latvia, the Latvian Chamber of Commerce and Industry, the Foreign Investors’ Council in Latvia, Transparency International Latvia Delna – held a seminar in the AmCham Outlook series to discuss the insolvency system of Latvia and its impact on Latvia’s business and investment environment.
Joining the debate were the following experts:
- Jānis Bordāns, Minister of Justice of Latvia;
- Gatis Gudermanis, Chief of the Economics Crimes Enforcement Department Latvian State Police;
- Ilmārs Krūms, Latvian Certified Insolvency Process Administrators Association;
- Helmuts Jauja, Managing Associate Deloitte Latvia; Chair of the Insolvency issues Working Group of Foreign Investors’ Council in Latvia.
The event was moderated by Romans Baumanis, Regional Advisor to Nord Stream in the Baltics.
To view the presentation of Ilmars Krums.
To view the presentation of Helmuts Jauja.
To view the presentation of Gatis Gudermanis.
To view the presentation of the results of the survey to assess the insolvency system. Click here to see full results of the survey.
The article by Leta on December 11, 2013
Video by LTV on December 10, 2013
The article by Leta on November 28, 2013
To view the debate online: