Latvia

A look at corporate, personal and, where relevant, partnership insolvency proceedings in Latvia, 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.


Tiesiskās aizsardzības process

Legal protection proceedings

  • Proceedings aimed at returning a debtor to solvency, in circumstances where it is already or expects to be in financial difficulties.
  • The proceedings are initiated by the court at the debtor’s request. Once initiated, the majority of creditors (two-thirds in value of secured creditors and a majority in value of unsecured creditors) appoint a person to supervise the proceedings, whose appointment will ultimately be approved by the court. The court will review the case using the debtor’s address three months before the request was lodged to help reduce the likelihood of debtors changing their registered office address shortly before submitting an application to make it harder for creditors to follow the case or to obtain a more favourable court.
  • The appointed person can be anyone, provided they are not barred from taking that responsibility by Latvian law, e.g. by having a previous conviction or by conflict of interests. This is an amendment introduced in 2017, as the previous law had required that only administrators could assume the role of supervisor in relation to legal protection proceedings.
  • After initiation, enforcement of judgments against the debtor is suspended. Certain penalties and late payment interest cease to accrue. All creditors are prohibited from initiating insolvency proceedings and secured creditors are prevented from requesting the sale of pledged property.
  • Within two months of initiation, the debtor must draw up a plan for overcoming its financial difficulties (the legal protection proceedings plan) and obtain approval of the plan from the majority of its creditors. Persons and companies in the same group of companies as the debtor, such as shareholders, do not have the right to vote on the approval of the legal protection proceedings plan.
  • If the plan is not approved, the court terminates the proceedings and the protection for the debtor is revoked.
  • If approved, the plan becomes binding on all creditors, including those who voted against it. The plan must be implemented within two years, though implementation can be extended for a further period of two years with the agreement of the majority of the debtor’s creditors.
  • During implementation of the plan, the debtor is prohibited from performing any activities that may harm the interests of creditors (unless otherwise stipulated in the approved plan) and is obliged to devote all profits towards implementation of the plan.
  • If the debtor fails to implement the plan, the court terminates the proceedings and opens insolvency proceedings in respect of the debtor.
  • Legal protection proceedings apply to companies, registered partnerships and natural persons who are registered as individual merchants but are not applicable to unregistered partnerships or ordinary natural persons.

Ārpustiesas tiesiskās aizsardzības process

Out-of-court legal protection proceedings

  • Latvian law distinguishes between legal protection proceedings (see previous section titled Tiesiskās aizsardzības process / Legal protection proceedings) and out-of-court legal protection proceedings. However, the only material difference is that in out-of-court proceedings, the debtor in financial difficulties agrees the legal protection proceedings plan and the identity of the supervisor with the majority of creditors in advance, prior to making a request to the court to initiate proceedings.
  • The court then merely approves the proposed plan and the elected supervisor.
  • The plan can then be implemented in accordance with the same rules that apply to legal protection proceedings.

Juridiskas personas maksātnespējas process

Insolvency proceedings of a legal person

  • Liquidation proceedings within the scope of which the debtor’s assets are sold/liquidated and the claims of creditors are settled from the proceeds.
  • Insolvency proceedings are initiated by the court in two stages. First, when the court receives an insolvency application, a court case is opened; however, at this stage, the legal status of the debtor remains unchanged. It is only after the application is considered and the court finds that one of several insolvency criteria is satisfied, that the court declares insolvency proceedings in respect of the debtor
  • An application can be made by the company in financial difficulties (the debtor) or a creditor in various circumstances including a failure by the debtor to pay a principal debt exceeding EUR4,268 (if the debtor is a Limited Liability Company (LLC) or Joint Stock Company (JSC)) or EUR 2,134 (if the debtor is an entity other than an LLC or JSC, such as a partnership) or where the debtor has failed to perform its obligations for more than two months. The court is entitled to declare insolvency proceedings of its own volition if a debtor has failed properly to implement a legal protection proceedings plan.
  • Once insolvency proceedings are declared, the court appoints an insolvency administrator to take over the management of the debtor, sell its assets, investigate transactions and settle creditors’ claims.
  • Secured creditors are prohibited from requesting the sale of pledged assets during the two-month period following the declaration of insolvency proceedings.
  • Creditors must submit their claims to the insolvency administrator within one month of insolvency proceedings being declared. If that deadline is missed, a creditor can still submit its claim within the extended deadline of six months following the declaration of the insolvency proceedings, but not later than until the day when the plan for settling the claims of creditors has been drawn up by the administrator. Creditors submitting their claims within the said extended deadline will have no voting rights at a creditors’ meeting. After this deadline a limitation period sets in, thereby the creditor loses its claim against the debtor.
  • Creditors receive regular updates and can object to and appeal certain of the administrator’s proposals and decisions.
  • Once all the necessary activities within the insolvency proceedings have been performed, including creditors’ claims having been settled, the insolvency administrator seeks the removal of the debtor company from the Commercial Register (the public register of all companies incorporated under Latvian law).

Pāreja no juridiskās personas maksātnespējas procesa uz tiesiskās aizsardzības procesu

Transition from insolvency proceedings of a legal person to a legal protection proceedings

  • Latvian law permits insolvency proceedings to be transitioned to legal protection proceedings provided that the majority of creditors agree on a legal protection proceedings plan and none of the specific prohibitions against the transition, which are set out in the law, are applicable (generally, where the debtor has previously failed to adhere to a legal protection proceedings plan).
  • Once the court has decided to implement the new legal protection proceedings plan, insolvency proceedings are terminated and the debtor’s management regains control of its activities and property.

Fiziskās personas maksātnespējas process

Insolvency proceedings of a natural person

  • Proceedings within the scope of which the claims of creditors are settled from the property of the debtor (a natural person) and upon completion of which the debtor is released from his/her outstanding obligations.
  • With some exceptions, generally, the rules that apply to insolvency proceedings of legal persons also apply to insolvency proceedings of natural persons.
  • Insolvency proceedings can be initiated by a debtor who has been a taxpayer in Latvia for the previous six months and who is not able to settle current debts of more than EUR5,000 or debts payable within a year of more than EUR10,000, or, alternatively, this person does not have a possibility to settle debt obligations out of which at least one debt obligation is based on an unsettled ancillary obligation or joint obligation between the debtor and a related person, if it exceeds EUR5,000.
  • The proceedings comprise a two-part process: a bankruptcy procedure and a debt discharge procedure.
  • The bankruptcy procedure is initiated when insolvency proceedings in respect of the natural person are declared whereupon an insolvency administrator is appointed, the debtor loses the right to deal with their property and hands it over to the administrator (except for two-thirds of their income and property required to generate income).
  • In the course of the bankruptcy procedure, the debtor’s property is sold and the proceeds are used to settle creditors’ claims.
  • It is then followed by a debt discharge procedure in the course of which the debtor follows a plan to settle the creditors’ claims. The length of the debt discharge procedure ranges from six months to three years, depending on the debtor’s ability to settle creditors’ claims.
  • Once the debtor has fulfilled his/her obligations under the plan, he/she is released from the remaining debts with some exceptions (including compensation in criminal proceedings). If the debtor fails to meet his/her obligations under the plan, the court terminates the insolvency proceedings without releasing the natural person from his/her debts.

Hipotēka Komercķīla

Mortgage Commercial Pledge

  • In legal protection proceedings, insolvency proceedings and insolvency proceedings of a natural person, a secured creditor is a creditor whose claim is secured by either a commercial pledge or a mortgage.
  • The proceeds of sale of the pledged or mortgaged asset are used to settle the relevant secured creditor’s claim, in addition to any auction costs, certain other administrative costs, and the remuneration of the insolvency administrator.
  • Secured creditors are treated differently and separately to unsecured creditors in respect of voting and claims.
  • Secured creditors are not entitled to request the initiation of insolvency proceedings of a legal person.
  • During legal protection proceedings, a secured creditor is prohibited from requesting the sale of the pledged assets, except if the court permits such sale in case the secured creditor would suffer material losses from such prohibition.

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 Members 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.

Regulation of the administrators' profession

  • A new procedure exists for the appointment and termination of insolvency administrators whereby appointments are made by the director of the Insolvency Administration. Consequently, the state will be responsible for all issues arising out of the administrators’ profession.
  • In order to be appointed, administrators must pass a mandatory exam, which remains the same as under the previously existing procedure, only now they must repeat that exam every two years.
  • A commission has also been established to deal with disciplinary issues within the profession. In particular, disciplinary cases can be brought for:
    Material violation of the law.
    • Material violation of professional ethical standards.
    • Regular violations of the law detected by the Insolvency Administration.
    • Abuse of powers detected by the Insolvency Administration.
    • Losses caused to the state, debtor or creditors, if the amount exceeds 20 minimal monthly salaries and this fact has been found in a court ruling that has come into effect.
  • Disciplinary penalties:
    • Remark with or without a fine not exceeding EUR150.
    • Reprimand with or without a fine from EUR150 to EUR15,000.
    • Removal from the position of administrator.
  • The Insolvency Administration is allowed to visit the administrator’s place of business and inspect documents, and can publish data relating to violations by administrators on the Insolvency Administration website to foster greater transparency within the profession for those appointing administrators.

Implementation in Latvia

The Directive has not yet been implemented in Latvia Implementation date The date of implementation of the Directive is not yet known. Currently it is planned that the Directive will be implemented by 17 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 insolvency processes are recognised on the basis of international agreements on mutual legal assistance and/or national norms of private international law, as well as the norms of civil procedure governing the recognition and enforcement of foreign judgments in general. There are no norms of private international law or civil procedure governing the recognition of foreign insolvency proceedings in particular. Customary grounds for the refusal of recognition (eg lack of competence of the foreign court, which gave the ruling, to examine the dispute or conflict with the public policy (ordre public) in Latvia) would apply.

Insolvency changes in response to COVID-19

Insolvency proceedings of a legal person

According to section 22 of the Law on the Suppression of Consequences of the Spread of COVID-19 Infection, until 1 September 2021, a creditor is prohibited from filing for insolvency proceedings of a legal person against its debtor. In addition, until 31 December 2021, the management of the debtor is not obliged to file for insolvency proceedings of a legal person, except in the case where the debtor has not paid its employees in full compensation for damage due to an accident at work or an occupational disease, or has not paid the mandatory state social insurance contributions within two months from the date set for the payment of wages.

Legal protection proceedings

Until 30 June 2021, a legal protection proceedings plan can provide for a four year period for the implementation of the legal protection proceedings, instead of to the usual two-year period.

This time period can be further extended for one year, if the required majority of creditors approve the extension.

With thanks to Edvīns Draba and Kristers Pētersons of Sorainen for writing this chapter of the dictionary. Law stated as at 27 May 2021.

Įmonės restruktūrizavimo byla

Company restructuring proceedings

  • Aimed at allowing companies in financial difficulty to continue to trade, settle their debts and avoid insolvency.
  • The restructuring proceedings may be initiated by the company itself or a creditor of the company. The latter can start restructuring proceedings only if his claims against the company, which are overdue, exceed the amount of 10 minimum monthly wages approved by the Government.
  • The CEO of the company acquires the right to apply to a court to initiate restructuring proceedings against a company if the CEO has in writing previously set a term of at least 15 days to creditors of the company to agree on financial assistance (for example, exempting the company from all or part of the its obligations or prolonging the obligation terms) or decide on out-of-court bankruptcy proceedings. The right to apply to the court runs from the expiry of the time limit indicated above.
  • A creditor of the company acquires the right to apply to a court to initiate restructuring proceedings against the company if the creditor has in writing previously set a term of at least 15 days to the company to fulfil its outstanding debt, agree on financial assistance or decide on out-of-court bankruptcy proceedings. The right to apply to the court runs from the expiry of the time limit indicated above.
  • The company or the creditor prepares a petition for the initiation of the restructuring proceedings of the company and submits it to the court.
  • The court has a right to open restructuring proceedings if: (i) the company has financial difficulties, ie is insolvent or might, within the next three months, become insolvent; (ii) the company carries out an economic and commercial activity that will allow it to fulfil its obligations in the future; and (iii) the company is not in the liquidation stage of bankruptcy proceedings (the restructuring proceedings can be initiated even against a company in bankruptcy proceedings if the company is not in the liquidation stage).
  • If the court has previously made a decision to terminate the restructuring case, and less than 5 years have passed since the effective date of this decision, a restructuring proceedings can only be opened together with the approval of a restructuring plan, ie the court must initiate a restructuring case and approve the restructuring plan by the same court order. In such a case the restructuring plan needs to be prepared and approved by the shareholders and creditors of the company before submitting the petition for the initiation of the restructuring proceedings of the company to the court.
  • Once a court order opening restructuring proceedings takes effect, the company is prohibited from making any payments to discharge pre-opening obligations.
  • The CEO of the company manages the company’s activities during the restructuring process, manages its assets, uses and disposes of them. The CEO of the company is also responsible for the implementation of the restructuring plan.
  • The appointment of the insolvency administrator is not mandatory. If the insolvency administrator has not been appointed, his rights and obligations are exercised by the CEO of the company.
  • Creditors must submit their claims to the insolvency administrator (if appointed) within a 30 day period from the date of publication of the court order to open restructuring proceedings on the website of the supervisory authority. The insolvency administrator (if appointed) reviews the claims and forwards a list to the court for approval. Creditors, whose claims are approved by the court, are entitled to vote in the creditors’ meeting.
  • The restructuring plan sets out the company’s proposals to settle its debts and restore its financial health.
  • The restructuring plan needs to be prepared, approved by the shareholders and the creditors of the company, and submitted to the court for judicial approval no later than within 4 months from the date of entry into force of the court order to open the restructuring proceedings.
  • The court, at the request of the insolvency administrator or the CEO of the company, has the right to extend the deadline for submitting the draft restructuring plan to the court, if approved by the creditors’ meeting and justified by clear progress in the consideration of the draft restructuring plan. The total time limit for submitting the draft restructuring plan to the court may not exceed 6 months from the date of entry into force of the court order to open the restructuring proceedings.
  • The shareholders of the company shall be deemed to have approved the draft restructuring plan if the draft restructuring plan has been approved by a majority of the shareholders (more than ½), who were present at the shareholders meeting.
  • The creditors shall be deemed to have agreed to the draft restructuring plan if, in each group of creditors, the draft restructuring plan has been approved by creditors, whose claims amount to more than ½ of the total amount of all court-approved claims of that group. The creditors of the company are divided into the following groups during the restructuring proceedings: (i) creditors, whose claims are secured by a pledge and / or mortgage; (ii) other creditors.
  • Failing to present a plan to the court within the requisite timescale results in the restructuring proceedings being terminated.
  • If approved, the plan applies to all creditors, including those who did not vote in favour of it.
  • Secured creditors’ claims are settled, in priority, from the proceeds of sale of pledged or mortgaged assets.
  • Restructuring proceedings cannot continue for more than four years, but can be extended by the court for an additional year.
  • Once the plan has been implemented, the insolvency administrator (if appointed) prepares a statement on the implementation of the restructuring plan for the court’s approval. The court approves the statement and closes the proceedings.
  • Restructuring proceedings may be terminated: (i) if the restructuring plan is not submitted within the requisite time frame; (ii) if the court does not approve the restructuring plan; (iii) due to non-implementation or improper implementation of the restructuring plan; (iv) if the company does not pay all or part of the taxes due to be paid by it; (v) if a statement on the implementation of the restructuring plan has not been submitted.
  • Restructuring proceedings may be ended: (i) if all creditors waive their claims; (ii) if the company satisfies all creditors’ claims; (iii) if the statement on the implementation of the restructuring plan is submitted and approved.
  • The statement on the implementation of the restructuring plan must be submitted to the court no later than 30 days after the deadline for the implementation of the restructuring plan. The statement on the implementation of the restructuring must be signed by the CEO of the company and the chairman of the creditors’ meeting after receiving the approval of the creditors’ meeting. The statement on the implementation of the restructuring shall be deemed to have been approved by the creditors’ meeting if it has been approved by the creditors of each group whose claims amount to more than 1/2 of the total claims of each group of creditors approved by the court.
  • Restructuring proceedings apply to all legal persons except for budgetary institutions, political parties, trade unions, religious communities and associations, credit institutions, payment institutions, electronic money institutions, insurance and reinsurance companies, management companies, investment companies, and intermediaries of public trading in securities.

Įmonės bankroto byla

Company bankruptcy proceedings

  • Court-driven terminal proceedings aimed at satisfying creditors’ claims from the company’s assets.
  • A petition for the bankruptcy of a company can be filed by a creditor/creditors, the company’s managing director or liquidator of the company.
  • The CEO of the company acquires the right to apply to a court to initiate bankruptcy proceedings against a company if the CEO has in writing previously set a term of at least 15 days to creditors of the company to agree on financial assistance (for example, exempting the company from all or part of the its obligations or prolonging the obligation terms) or decide on out-of-court bankruptcy proceedings. The right to apply to the court runs from the expiry of the time limit indicated above.
  • A creditor of the company acquires the right to apply to a court to initiate bankruptcy proceedings against a company if the creditor has in writing previously set a term of at least 15 days to the company to fulfil its outstanding debt, agree on financial assistance or decide on out-of-court bankruptcy proceedings. The right to apply to the court runs from the expiry of the time limit indicated above.
  • The liquidator of the company has the obligation to initiate bankruptcy proceedings if during the liquidation process it becomes clear that the company is insolvent. Before submitting the petition for the initiation of bankruptcy proceedings to the court the liquidator has an obligation to inform the creditors of the company (in writing) that the company is insolvent and that the liquidator will file a petition to the court. The right to apply to the court for the opening of the insolvency proceedings arises from the moment of the submission of the liquidator’s notice to the creditors.
  • The company, the creditor or liquidator prepares a petition for the initiation of the bankruptcy proceedings of the company and submits it to the court.
  • The court is obliged to rule on the petition not more than one month after it has been filed, extendable once by 30 days.
  • Once the petition is accepted by the court, an automatic moratorium arises and any realisation of company assets is suspended. The latter rule has an exception: if a bailiff has announced the sale of the company’s assets before the date of the bankruptcy proceedings against the company, the court may allow the bailiff to complete the sale in accordance with the Code of Civil Procedure and transfer the received amount to the creditors’ account.
  • If the court finds the company to be insolvent (the company is deemed to be insolvent when (i) the company is unable to fulfil its property obligations, including financial obligations, in timely manner; or (ii) the obligations of the company exceed the value of its assets), it will initiate bankruptcy proceedings and appoint an insolvency administrator whereupon the powers of the directors and other managing bodies of the company cease and the insolvency administrator assumes control of the company.
  • All enforcement actions, as well as the accrual of interest, are suspended once the court order takes effect. In addition, from the date of entry into force of a court order to open bankruptcy proceedings, all obligations of the company shall be deemed to have expired, unless: (i) the insolvency administrator, taking into account the economic benefit of the obligation to the company and its creditors, notifies the other party to the obligation within 30 days from the date of entry into force of the court ruling that the obligation will be performed; and/or (ii) the obligations arise from the continuing economic and commercial activity, which the insolvency administrator, taking into account the economic benefit of its continuation to the company and its creditors, decides to perform before the first creditors’ meeting.
  • Creditors must submit their claims to the insolvency administrator within a 30 day period from the date of publication of the court order to open bankruptcy proceedings on the website of the supervisory authority. The insolvency administrator reviews the claims and forwards a list to the court for approval. Creditors whose claims are approved by the court are entitled to vote in the creditors’ meeting.
  • Insolvency proceedings may be terminated if: (i) all creditors waive their claims; (ii) the company satisfies all creditor claims; (iii) a settlement is concluded with creditors, which is approved by the court; or (iv) the restructuring proceedings of the company are initiated.
  • The court makes an order to liquidate the company due to bankruptcy after the end of the period of 3 months following the coming into force of the court order approving the creditors’ claims, if during that period the insolvency administrator has not applied to the court to terminate the bankruptcy proceedings and initiate restructuring proceedings or approve the settlement agreement.
  • Secured creditor claims are settled, in priority, from the proceeds of sale of pledged assets.
  • Following submission to the court of a final statement on the bankruptcy proceedings, the court rules on the termination of the existence of the company, it is removed from the register and ceases to exist.
  • Bankruptcy proceedings apply to all legal persons except for budgetary institutions, political parties, trade unions, religious communities and associations.

With thanks to Raivo Raudzeps of Sorainen for writing this chapter of the dictionary. 


1Directive (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.
2Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast).