“Professional and innovative supervisory institution”
Administrators operate in the Republic of Latvia under the wing of the Ministry of Justice. Last year, they handled 2,326 insolvency processes, of which 242 were declared once morest legal entities and 737 once morest individuals. Unfortunately, in 59% it was necessary to draw up a message regarding the absence of the debtor’s property – these are the so-called “empty” processes. However, 71% of cases involving individuals can be successfully completed.
“The profession as a whole currently employs professional and motivated administrators,” its director Inese Steina points out in the report of the Insolvency Control Service. Although last year the number of complaints once morest the actions of administrators decreased by 57% compared to 2017, and the number of recognized violations by 86%, three dishonest employees were still discovered who maliciously used their powers: as a result, criminal cases were brought once morest them.
The record cases for 2023 can be considered 19.1 million euros that the administrators returned from SIA EKOAGRO, as well as 6.9 million euros of returned property from AS Dzintars. Regarding the latter, it is worth paying attention to the cost of the insolvency process itself – 2 million euros, and the administrator’s fee – 300,000 euros.
Yes, the service of an insolvency administrator is very profitable, although also quite dangerous: everyone remembers how the life of Martins Bunkus, who was shot near a cemetery, ended. And approximately one in four (24%) was punished disciplinaryly by the Insolvency Control Service, although they act on the principle of “consult first” in relation to colleagues; half of the inspections started ended with explanations of errors. After all, it’s clear that the workload is considerable – on average, one administrator manages 18 processes. However, there are a total of 148 administrators working in Latvia, and another 114 want to become one. There’s a queue to join the profession!
When, nevertheless, the administrator was punished by the control authority, it will not be difficult to pay him a fine – on average 616 euros – once morest the background of the general fees.
If we consider the protected employees of bankrupt companies, then on average 1,805 euros of funds were paid per person. In total, the claims of 699 employees of 62 former legal entities were satisfied.
Everything is decided by the impassive EMUS
This abbreviation translated from Latvian means Electronic Insolvency Recording System, it is designed to digitize all data on bankruptcies in Latvia. The system has accumulated an impressive number of documents – 671.6 thousand, regarding 33.7 thousand processes. In addition to the growth of digitalization, administrators were affected by significant changes adopted on March 5 of this year by the Cabinet of Ministers.
The new Rules No. 148, in particular, provide for:
– revise the areas and scope of training programs for applicants for administrators, adding to them the area of preventing money laundering and terrorism and protecting the data of individuals;
– compose the third part of the exam for applicants to administrators from a structured interview, during which the applicant’s competencies are tested, while the first and second parts are spent answering theoretical questions;
– the procedure for issuing examination grades is specified by the judicial practice of the administrator;
– the decision is transmitted electronically, the administrator’s plastic card is no longer issued;
– exams in 2024 will be held twice – on April 25 and October 16.
The aforementioned EMUS also performs the most important function of automated selection of administrators to conduct business on the principle of randomness. This procedure, the Control Service claims, is “reliable, transparent and allows an independent third party to verify its legality.” “At the same time, the process of supervision of the insolvency process of credit institutions is still carried out by the Bank of Latvia.”
One thing is unclear – if a computer devoid of emotions performs its functions strictly in accordance with the Insolvency Law, then how can cases be distributed in strict accordance with their “gravity”. After all, it is quite possible that one administrator, out of almost two dozen processes on average, managed by him, will develop several complex ones – and therefore, in the management of others, there will objectively be a bottleneck.
But the administrator, in accordance with the Insolvency Law, is obliged to “timely, comprehensively and fully evaluate the debtor’s transactions”, as well as “to act to return the debtor’s assets and bring to justice, established by law, certain persons who took actions to avoid fulfilling the debtor’s obligations and causing losses to the debtor.”
That is, the very fact that a legal entity or a specific person has gone bankrupt is not the basis for an automatic admission of guilt. And the joke sounds truly righteous: I forgive everyone to whom I owe!
In addition, the administrator is obliged to comply with the Supervision Law. It, in particular, provides for “client research” and documentation of his transactions. The Sanctions Law also obliges administrators to examine under a microscope whether the client’s operations fall under them.
What was yours has become ours?
If we return to the violations that the Insolvency Control Service caught from administrators, then the cases appear simply marvelous.
Thus, according to the report, “in-person in-depth inspections stated that the administrator transferred funds from the debtor’s current account to his private current account (indicating the purpose of the payment as “administrative expenses” or “advance payments”) in order to pay off the administrator’s tax payments as a self-employed person persons (mandatory payments of state social insurance and personal income tax”).
These actions, the Control Service admits, “indicate the administrator’s malicious use of his powers when disposing of the debtor’s property.” In such egregious cases, the Service goes to court once morest the administrator. In total, in 2023, 57 complaints were received once morest the activities of 31 administrators in 40 insolvency processes, which indicates an increase in violations by approximately one-fifth.
Not always, of course, everything is as tough as indicated above. “The identified violations are mainly related to the lack of openness of the insolvency process… For example, information/documents were not provided, a detailed response/information was not issued, a plan for the sale of property was not sent, reports of the administrator’s work were not sent.”
In any case, both the creditor and the debtor must be protected in our country. And of course, the administrator himself – to the extent that he works in accordance with the laws.
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2024-04-26 00:27:34
