A look at corporate, personal and, where relevant, partnership insolvency proceedings in Estonia, with a brief description to explain key features, as part of our Dictionary of Insolvency Terms in EU Member States. In particular, we highlight who controls the procedure and whether it is likely to be accompanied by a moratorium to prevent enforcement.



  • The reorganisation of an enterprise means the application of a set of measures in order for the enterprise to overcome economic difficulties, to restore its liquidity, improve its profitability and ensure its sustainable management.
  • The debtor must file a reorganisation application with the court showing that it is in danger of becoming insolvent and that a reorganisation is likely to solve its problems and restore its sustainability. Permanent insolvency precludes reorganisation. Reorganisation proceedings cannot be commenced if bankruptcy proceedings have already been commenced and are pending, the debtor is being liquidated, or if reorganisation proceedings have been attempted within the previous two years.
  • If the court commences reorganisation proceedings, any enforcement proceedings commenced in relation to the debtor’s assets are suspended until the reorganisation plan is approved or the proceedings are terminated. Commencing reorganisation proceedings also stops the accumulation of fines and contractual penalties and, subject to court approval, may suspend court proceedings regarding a financial claim against the debtor until the approval of the reorganisation plan or termination of the reorganisation proceedings.
  • A reorganisation plan can propose to compromise the rights of secured creditors, but it is not possible to approve such reorganisation plan without the consent of the creditor with the secured claim.
  • The plan will be approved if more than half of the creditors in number and two-thirds by value vote in favour of the plan. In limited circumstances, the court may approve a plan that has not been approved by the creditors.
  • The obligations that are the subject of the approved plan are amended accordingly.



  • Bankruptcy provides for an insolvent company’s or natural person’s assets to be realised and the proceeds distributed to creditors. Any natural or legal person may be subject to bankruptcy proceedings, with the exception of the state or a local government.
  • Commenced by a petition, filed either by the debtor or one of its creditors, that the court considers, and, if it finds that the debtor is "permanently insolvent," the court will declare the debtor bankrupt and appoint a bankruptcy trustee.
  • After a declaration of bankruptcy is made, the powers of the directors cease, the bankruptcy trustee takes over control of the debtor’s assets and management of its affairs and all enforcement proceedings against the insolvent debtor in respect of both secured and unsecured claims are terminated. Interest is prevented from accumulating.
  • Debts secured by pledge take priority and will be paid from the proceeds of realisation of secured assets (less the proportionate amount of the costs related to the bankruptcy proceedings up to a maximum of 15% of the value of the asset in question). The creditor can claim any shortfall as an unsecured debt.
  • All creditors have two months from the date of publication of the bankruptcy notice to lodge their claim with the bankruptcy trustee. Any unsecured creditors who have not lodged their claim within those two months will be subordinated to unsecured creditors who have lodged their claim within the requisite timeframe.
  • Where bankruptcy proceedings have been initiated in respect of a natural person, they can apply to court for a release of debts that have not been or are not going to be paid in the bankruptcy proceedings. The petition for release must be submitted to the court by no later than the time of the first general meeting of creditors.
  • During the proceedings, the debtor’s income is transferred to a trusted representative appointed by the court.
  • The court shall make a decision as to the release of the debtor from their obligations after five years from commencement of the proceedings for the release of debts.



  • Once bankruptcy has been declared by the court (see section titled Pankrotimenetlus/Bankruptcy) a debtor may make a proposal to its creditors to compromise on relevant debts and/or an extension of the term for repayment. The right to propose a compromise is available to all legal and natural persons who have been declared bankrupt (not just companies), with the exception of the state and local governments.
  • Unsecured creditors vote on whether to accept or reject the proposal. A compromise will be approved by the court if at least one half of the creditors present (whose claims must constitute at least two-thirds of the total amounts owed to all creditors) vote in favour of the compromise.
  • If a compromise is approved by the court, the bankruptcy proceedings are automatically terminated and the debtor will manage its own affairs. However, the trustee will remain in office to supervise the performance of the compromise.
  • If a compromise is approved by a creditors’ meeting and the court, the debts subject to the compromise may not be enforced except in accordance with the compromise. Secured debts are not affected by the compromise unless the creditors have established that the pledged asset is necessary for continuing the business of the debtor. In such circumstances, the security cannot be enforced for a defined period, not exceeding one year.
  • Compromise is sometimes abused by creditors affiliated to the debtor; as such, the court may refuse to approve a bad faith compromise.

Võlgade ümberkujundamise menetlus

Reorganisation / debt transformation within bankruptcy

  • A flexible procedure under which natural persons who have been declared bankrupt can restructure their financial obligations so as to rearrange and/or reschedule their debts. The aim is to restore the individual to solvency and avoid bankruptcy proceedings.
  • A reorganisation is commenced by the debtor making a court application. On commencement of a reorganisation the court will stay any enforcement proceedings (ie there will be a moratorium on enforcement) until either the reorganisation plan is approved or the proceedings are terminated. During a reorganisation, the debtor retains control over its assets but is subject to the supervision of a reorganisation advisor appointed by the court. The court will approve the reorganisation plan submitted by the debtor if it has not been challenged by any creditor. The court may also approve the reorganisation plan in circumstances where the plan is rejected by creditors, but the court finds that the restructuring of the debts is justified, taking into account the legitimate interests and rights of the parties. A claim secured by a pledge may be restructured only if the creditor’s consent has been obtained.



  • A movable may be encumbered with a pledge such that the pledged thing is transferred into the possession of the pledgee and the establishment of a possessory pledge is agreed upon. A thing may also be encumbered by a pledge so that the thing is transferred to a third person and the pledgee obtains indirect possession of the pledged thing.
  • If the debtor has been declared bankrupt or is the subject of restructuring, the property encumbered with a mortgage or pledge can be sold by the insolvency administrator.
  • Secured debts have priority and will be paid from the proceeds of sale of the mortgaged or pledged assets.


Commercial pledge

  • Commercial pledges are pledges on movable property of a company, equity in a company and vehicles. Commercial pledges can be perfected by registration to a public register without the undertaking transferring possession of the pledged property.
  • The commercial pledge is accepted without defence. In the event of compulsory execution or bankruptcy, a pledgee may demand the settlement of a claim out of the property encumbered with a commercial pledge to the extent of the amount of the pledge according to the ranking of the pledge.
  • A pledgee does not have a preferential right to payment from property which is seized before entry of the commercial pledge in the commercial pledge register or on the day the entry is made. Upon release of property from seizure or its exclusion from the bankruptcy estate, the commercial pledge also extends to such property.

Üürileandja pandiõigus

Lessor's right of security

  • Secured creditors’ claims, including a possessory pledge, commercial pledge or lessor’s right of security, are satisfied in the bankruptcy proceedings as claims with first priority.
  • The secured claims are met from the proceeds received from the sale of the pledged asset after the deduction of a proportionate amount of the costs relating to the bankruptcy proceedings, up to a maximum amount of 15% of the value of the sold asset.

EU Directive Implementation

The EU Directive on Restructuring and Insolvency1 requires Member States to incorporate minimum common standards into their national restructuring and insolvency laws by 17 July 2021, with an option to extend that deadline by one year. The intention of the Directive is to reduce barriers to the free flow of capital stemming from differences in Member States’ restructuring and insolvency frameworks, and to enhance the rescue culture in the EU.

Notable features required to be included in Member States’ national laws include:

  • An effective preventive restructuring framework to enable debtors experiencing financial difficulties to restructure at an early stage, with a view to preventing insolvency and ensuring their viability.
  • A stay of up to four months extendable to up to 12 months to support negotiations of a restructuring proposal, which should prevent individual enforcement action and include rules preventing the withholding of performance, termination, acceleration or modification of essential contracts.
  • An ability to cram down dissenting classes of creditors.
  • Adequate protection for financing needed to allow the business to survive or to preserve the value of the business pending a restructuring, and for new financing necessary to implement a restructuring plan.
  • Provision for honest, insolvent entrepreneurs to have access to a procedure that can lead to a full discharge of their debts (subject to limited exceptions) within three years.

Implementation in Estonia

The Directive is not implemented in Estonia yet. Estonia has requested an extension to implement the directive.

Implementation date

The entry into force of the law is planned for 1 January 2022.

Recognition of foreign insolvency processes

EU Regulation on Insolvency Proceedings

The EU Regulation on Insolvency Proceedings2 applies to all EU Member States except Denmark and requires that certain collective insolvency proceedings, which are listed in Annex A to the Regulation, occurring in one EU Member State are automatically recognised in all other EU Member States and that each EU Member State automatically recognises the powers and authority of an insolvency practitioner appointed in another EU Member State.

Recognition of third country insolvency processes

Third country, including UK, foreign judgments, including insolvency judgements, for example UK Sanction orders, are recognized, provided that they fulfil the general criteria required for the recognition and enforcement of foreign judgments by the Estonian Code of Civil Procedure. The general rule under Estonian law is that all foreign judgments are recognized and enforced. The recognition and enforceability can be challenged on the basis that a foreign judgment or order is contrary to the essential principles of Estonian law, a party to the proceedings was not granted due process rights, a decision is in conflict with an earlier Estonian court decision (or the same proceedings are on-going in Estonia) or a recognized/recognizable foreign decision, or the court that made the decision did not have international jurisdiction.

A petition for declaring a court decision of a foreign state enforceable is submitted to the Civil Court. When dealing with a petition for declaring a court decision of a foreign state enforceable, the court examines the prerequisites for recognition of the court decision. The court does not verify the correctness of the court decision in respect of the merits of the matter.

Insolvency changes in response to COVID-19

For more information on changes to insolvency law in Estonia as a result of the COVID-19 pandemic please see our Guide to changes in insolvency law in response to COVID-19.

At present, no relevant legal acts related to changes to insolvency law in Estonia as a result of the COVID-19 pandemic, are in force in Estonia.

With thanks to Mari Karja and Anu Liinsoo of Sorainen for writing this chapter of the dictionary.

Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) 2017/1132.
Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast).