Formation of Creditor Groups in Reorganisation Proceedings: Does Estonia Need a Better Regulation?

• Author: Mari Schihalejev
• Pages: 159-167

159

JURIDICA INTERNATIONAL 21/2014

Mari Schihalejev

Doctoral Student

University of Tartu

Formation of Creditor Groups

in Reorganisation Proceedings:

Does Estonia Need a Better

Regulation?

1. Introduction

The objective of reorganisation proceedings is to enable enterprises to restore their liquidity, improve their

prof‌i tability, and ensure their sustainable management. The Estonian Reorganisation Act*1 (RA) entered

into force on 26 December 2008. Since there was no similar regulation in Estonia before, no widespread

court practice can be cited; however, it is clear that for some questions the existing law does not provide

optimal regulation. In its Submission for Approval of the Plan of Developing the Draft Act on Amending the

Reorganisation Act*2, the Estonian Ministry of Justice has drawn attention specif‌i cally to the problem that

the effectiveness of reorganisation proceedings is low. One way to bring greater effectiveness is to ensure

protection of the rights of the debtor and creditors alike. This refers to the law having to enable compa-

nies to have the opportunity for reorganisation, if it is reasonable, and having to preclude the possibility

of general rights of creditors not being protected against abuse by creditors with special interests. As the

creditors have to accept the reorganisation plan, one means for reaching the objectives of reorganisation

proceedings is division of creditors into several voting groups. The associated issue has been noted in the

above-mentioned plan and had also been underscored earlier in the legal literature.*3

The main problem related to creditor groups is that the RA does not oblige the debtor to designate indi-

vidual creditor groups and makes no special provisions for pledgees or debtor-related persons. This means

that the debtor is able to manipulate the votes in order to ensure the acceptance of the plan. According to

the RA’s §24 (1), creditors shall decide on acceptance of a reorganisation plan by means of voting. Accord-

ing to §21 (2) of the RA, this reorganisation plan may prescribe that the claims of creditors shall be satisf‌i ed

separately, by creditor group. Creditors with the same rights constitute one group. However, it is unclear

what is meant by ‘the same rights’. The provisions regulating the voting process do not prescribe def‌i nitive

instructions. The RA does not specify clearly which creditors should be divided into distinct groups. Nor

does the RA even state the minimum requirements applicable in those situations in which creditors shall

1 Saneerimisseadus. – RT I 2008, 53, 296; RT I, 21.12.2012, 1 (in Estonian).

2 Saneerimisseaduse muutmise seaduse eelnõu väljatöötamiskavatsuse esitamine kooskõlastamiseks [‘Sub mission for Approval

of the Plan of Developing the Draft Act on Amending the Reorganisation Act’]. Available at http://eelnoud.valitsus.ee/

main#QZD0ekBD (most recently accessed on 5.1.2014) (in Estonian).

3 P. Varul. Maksejõuetuse areng Eestis [‘Developments in insolvency law in Estonia’]. – Juridica 2013/4, p. 238 (in Estonian).

http://dx.doi.org/10.12697/JI.2014.21.14