The Ministry of Justice urges the implementation of new support measures to overcome the consequences of the spread of COVID-19 01.04.2020


 

Minister of Justice, Jānis Bordāns, has submitted amendments to the Law “On Measures for the Prevention and Suppression of Threat to the State and Its Consequences Due to the Spread of COVID-19” for review at the Cabinet of Ministers, proposing the introduction of temporary changes to the legal protection process and the procedure for the extinguishment of liabilities related to insolvency proceedings, as well as in the area of delays in the enforcement of civil liabilities.

J.Bordāns: “The purpose of the legal protection process is to solve long-term financial difficulties by achieving a mutual agreement between the debtor and creditors. However, in order to mitigate the consequences caused by the spread of COVID-19, an immediate financial support is needed, which is currently provided by the solutions that are already approved by the government - the allowances for idle time, Altum projects and other financial instruments. The Ministry of Justice has proposed a number of support measures that have been aligned with business organizations and insolvency experts. The new changes will provide support to both legal and natural persons who are currently subject to the legal insolvency framework."

 

The draft law prepared by the Ministry of Justice proposes more favourable conditions for the implementation of the legal protection process during the emergency situation declared in the country, and for a specified period after its end (for six months), stipulating that during this time period the plan for legal protection measures (both the initial one and the amended one) may be approved for a time period of up to four years, instead of the currently determined two years.

Likewise, the draft law proposes that during the insolvency proceedings of a natural person the court may also decide on the postponing of the time period for making payments included in the plan for the extinguishment of liabilities, while extending the duration of the procedure for the extinguishment of liabilities for the respective time period based on a reasoned application by the debtor during the procedure for the extinguishment of liabilities related to insolvency proceedings, for the time period of the emergency situation in connection with the spread of COVID-19 and for six months after its end.

 

The Ministry of Justice proposes to introduce temporary changes in the area of delays in the execution of civil liability obligations in order to minimize the impact of additional negative consequences on persons who are already unable or who will not be able to ensure timely execution of civil liability obligations in the near future. The prepared amendments foresee that between 1 April 2020 and 1 September 2020 the interest for late payments of civil liability obligations shall not exceed the lawful interest (6% per year). Such a provision of the law could reduce disputes between the parties of civil proceedings.

 

At the same time, the amendments entail the suspension of the running of the prescriptive period of obligation rights provided by law from 12 March 2020 until 1 July 2020, providing that this time period shall be deducted from the calculation of the limitation period. During the emergency situation caused by the spread of COVID-19, the suspension of the limitation period would allow creditors and debtors to settle civil disputes in court for the protection of their interests at a later time period instead of doing it now. The suspension of the limitation period provided for in the draft law would be applicable only to the substantive terms of the civil law with regard to limitation periods, since it shall be possible to require renewal of civil procedural terms that are overdue.

Taking into account the emergency situation in the country and the imposed bans on public gatherings, the Ministry of Justice recommends providing for the possibility to organise general meetings of members of associations and cooperative societies, as well as the meetings of creditors as governed by law, remotely. A member of an association or a  cooperative society could participate and vote at a meeting of members until 1 September 2020 without physically attending the meeting:

1) by voting in writing (including by using electronic means of communication) before the general meeting of members;

2) by ensuring the right of a member to participate and vote at a membership meeting using electronic means of communication.

 

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