Acting as independent authority, the Insolvency Division supervises over the activities of the debtor and persons connected with it/him/her in connection with bankruptcy proceedings of the debtor. It is also responsible for administrative supervision of the bankruptcy trustees in Estonia.
The Insolvency Division (so called Insolvency Ombudsman) is independent in its activities with autonomous competence provided by Bankruptcy Act of Estonia and has its own budget.
The tasks of the Insolvency Division are:
- to supervise the activities of the debtor and persons connected with it/him/her in connection with the bankruptcy proceedings of the debtor and
- to investigate potential unlawful conduct of the debtor and connected persons in causing insolvency.
In the performance of its tasks, the Division performs special audits and public investigations of bankruptcy proceedings and makes proposals to the bankruptcy trustee in conducting bankruptcy proceedings.
According to the 2019 Doing Business Report of the World Bank (data as of 1 May 2018), the average recovery rate in bankruptcy proceedings in Estonia is 40.7 cents on the dollar, while in Finland it is 88.3 cents. The OECD average is 71.2 cents on the dollar. The purpose of the Division is to investigate the causes of unlawfully induced insolvency and influence through its actions the rate of payments to creditors. It is necessary to achieve greater transparency in bankruptcy proceedings, reduce unlawful abatement and therefore improve the Estonian business environment.
The Insolvency Division is responsible for exercising administrative supervision over bankruptcy trustees in bankruptcy proceedings regarding the lawful conduct of proceedings and the expediency of the costs of bankruptcy proceedings.
The Insolvency Division and the management board of the professional union of the Chamber of Enforcement Agents and Bankruptcy Trustees exercise administrative supervision over the activities of trustees on the basis of the information which becomes known to the Insolvency Division or the management board of the professional union of the chamber and which gives reason to believe that the bankruptcy trustee has violated their obligations.
The Insolvency Division and the management board of the professional union of the chamber are obliged to notify the court and the bankruptcy committee of a violation of the obligations of a trustee discovered in the course of administrative supervision.
In order to exercise administrative supervision, the Insolvency Division has the right to:
- obtain the necessary information and documents from the bankruptcy trustee, debtor, creditors’ committee and the state and local government agencies;
- obtain the necessary information from creditors;
- examine the court file of the bankruptcy proceeding, bankruptcy trustee’s file, documents of the general meeting of creditors and documents of the creditors’ committee;
- examine the records maintained on the bankruptcy proceedings by the bankruptcy trustee, and the accounts and financial situation of the debtor;
- be present at the meetings of the creditors’ committee and the general meetings of creditors;
- obtain accounts statements of the debtor-based payment account opened by the bankruptcy trustee and the debtor’s account concerning the period when the trustee had the right to use the debtor’s account in credit institution or payment services’ provider;
- examine the documents of the liquidation proceedings and the bank statements of the accounts of a company to be liquidated concerning the period of the liquidation proceedings;
- issue opinions, recommendations and precepts to the bankruptcy trustee;
- have recourse to the court in order to impose a fine on the bankruptcy trustee, release the trustee, impose a prohibition on acting as a trustee or reduce the remuneration of the trustee.
Upon failure to comply with the precept, the Insolvency Division may impose a non-compliance levy on the addressee pursuant to the procedure provided in the Substitutive Enforcement and Penalty Payment Act, the upper limit of non-compliance levy being 9600 euros. The non-compliance levy is collected into the state budget.
Only courts exercise supervision over the lawfulness of bankruptcy proceedings and perform other duties provided by law. For example, in the bankruptcy proceedings of a debtor, a judicial clerk is competent to issue court rulings and to exercise court supervision. A judge decides on the specific division of tasks between themselves and a judicial clerk in a bankruptcy matter, and may give instructions to the judicial clerk.
The following lies within the exclusive competence of judges:
1) appointment of an interim trustee and adjudication of a bankruptcy petition;
2) actions related to bankruptcy proceedings;
3) adjudication of disputes relating to the number of votes determined by a trustee at the general meeting of creditors;
4) approval of a list of creditors in proceedings on petition;
5) termination of bankruptcy proceedings;
6) approval of the remuneration and expenses of a trustee in bankruptcy and a member of a bankruptcy committee;
7) adjudication of a claim for reimbursement of the deposit paid to cover the remuneration and expenses of an interim trustee or the expenses of bankruptcy proceedings;
8) imposition of a fine, prohibition on business, compelled attendance, detention, and prohibition on departure from residence.
Among other things, the Insolvency Division contributes to the development of common insolvency practices in bankruptcy, reorganisation and debt restructuring proceedings and in proceedings for the release of natural persons from their obligations.
The Insolvency Division does not exercise supervision over the persons specified in subsection 2 of § 2 of the Financial Supervision Authority Act, i.e. persons authorised and supervised by the Estonian Financial Supervision Authority.