How Does Company Liquidation Work in Estonia?

Question from Lias, How Does Company Liquidation Work in Estonia?

Answer from AI:

In Estonia, the process of liquidating a company due to insolvency is governed by the Bankruptcy Act. This process is designed to ensure that the company’s assets are distributed fairly among its creditors. Here’s a general overview of the steps involved and how debtors are paid:

Initiating Insolvency Proceedings

• A petition for bankruptcy can be filed by the debtor company itself or by its creditors if the company is unable to fulfill its financial obligations.
• The court will review the petition and decide whether to initiate bankruptcy proceedings.

Appointment of a Trustee

• Once the proceedings are initiated, the court appoints a trustee to oversee the liquidation process.
• The trustee’s role is to take control of the company’s assets, evaluate the financial situation, and prepare an inventory of assets.

Claims Submission and Verification

• Creditors must submit their claims to the trustee within a specified period.
• The trustee then examines the claims and compiles a list of accepted and rejected claims.

Asset Liquidation

• The trustee liquidates the company’s assets, which may involve selling property, collecting receivables, and terminating contracts.
• The proceeds from the liquidation are used to cover the costs of the bankruptcy proceedings and to repay creditors.

Payment to Creditors

• Creditors are paid according to a legally established priority order:
1. Secured creditors are paid first from the proceeds of the assets that served as collateral for their claims.
2. Priority claims, such as employees’ unpaid wages and public law obligations, are paid next.
3. Unsecured creditors are paid if there are any remaining funds after satisfying secured and priority claims.
• If the funds are insufficient to cover all claims, they are distributed proportionally among creditors of the same priority level.

Conclusion of Proceedings

• Once all assets have been liquidated and creditors have been paid to the extent possible, the trustee prepares a final report.
• The court reviews the report and, if everything is in order, concludes the bankruptcy proceedings.
• The company is then removed from the commercial register and ceases to exist.

Legal Advice and Assistance

It’s important to note that the liquidation process can be complex and may require professional legal advice. Creditors, shareholders, and company directors should consider consulting with a legal professional who specializes in insolvency law to understand their rights and obligations during the process. Additionally, the Estonian Chamber of Bailiffs and Trustees in Bankruptcy provides resources and information that may be helpful.

For more detailed information on the Bankruptcy Act and related procedures, you can refer to the official legislation provided by the Estonian government.

Remember, this information is a general guideline and not a substitute for personalized legal advice. If you are involved in a company liquidation process in Estonia, it is advisable to seek the assistance of a legal professional.