Bankruptcy of an Estonian Company

Bankruptcy of an Estonian CompanyThe termination of a company’s activity is as natural a stage in the development of any business as its beginning. At the same time, it is often very difficult to liquidate an enterprise due to the large number of legal and business relations, obligations, and often debts that are part of the company’s business activity.

Depending on economic circumstances, the company owner, who has decided to end the business, must make a choice between liquidation or bankruptcy.

If it is a question of voluntary termination (the law also establishes cases when the company is terminated forcibly), the issue is resolved at the general meeting of shareholders, and in case of a positive decision, the liquidation process begins. This lengthy and time-consuming procedure of debt collection, sale of property and satisfaction of creditors’ claims involves many issues of both a legal and economic nature. As a result of the liquidation, the assets remaining after the satisfaction of the creditors’ claims will be distributed among the shareholders, after which the company is deregistered from the Commercial Register.

The process is somewhat different in the case of bankruptcy. The main difference here is the fact that the company is unable to satisfy the claims of creditors, and that this inability is not temporary, taking into account the economic situation. If such a situation occurs, the members of the management board of the company must immediately file to the court an application for declaring bankruptcy. It should be stressed that the filing of an application for bankruptcy in this case is the responsibility of the members of the board and, in the event of non-compliance, members of the management board may incur both civil and criminal liability.

Not only the debtor but also the creditor may file an application to the court to declare a company bankrupt, however, it should be remembered that the main condition here the debtor’s insolvency.

In any case, the processes described above are quite complex from both a legal and an economic point of view, and it is extremely difficult to navigate in them without in-depth knowledge. A good way in building this knowledge is to start with simple consultation. The further participation of our specialists will be determined solely by your needs.

If the Estonian company is put into liquidation, the company’s creditors (clients) can file their claims through the appointed liquidator within four months. If the assets of the company are insufficient to fulfil all its obligations, the liquidator is required to file to the court an application to declare the company bankrupt.

The court will most likely declare the company bankrupt and appoint an interim bankruptcy trustee, The court proceedings will begin. If the company does not have any assets that can be sold in the process of bankruptcy, and none of the company’s creditors deposits with the court funds to cover the future work of the bankruptcy trustee, the bankruptcy process will end on the basis of the deregistration of the company. After that, it is no longer possible to submit a claim against the company’s former management board member.