In the case at hand, the client lodged a statement of claim for invalidation of the resolutions of the debtor’s creditors’ meeting on initiation of out-of-court bankruptcy proceedings of the debtor.
The Court of Appeal of Lithuania, by its ruling of 4 March 2021, rejected the debtor’s separate complaint and upheld the favourable ruling of the court of lower instance.
The Court of Appeal of Lithuania upheld the considerations set out in the reply drafted on behalf of the client and clarified that:
(i) Both the Enterprise Bankruptcy Law of the Republic of Lithuania previously in force and the current Law of the Republic of Lithuania on Insolvency of Legal Entities impose an obligation to notify each creditor in writing of an intention to initiate out-of-court bankruptcy proceedings, irrespective of the amount of the creditor’s financial claim towards the entity.
(ii) The first meeting of creditors considered the essential issue of initiating out-of-court bankruptcy proceedings against the debtor, while the failure to inform the creditor of the convocation of the creditors’ meeting undermined the creditor’s rights to object and possibilities of objecting to the application of out-of-court bankruptcy proceedings, appointment of an insolvency administrator, thus eliminating the creditor’s opportunity to submit his own arguments and evidence (inter alia concerning the insolvency of the company).
(iii) The creditor’s possibility of exercising other rights at his disposal depends only on proper performance of the duty to notify the creditor of an intention to initiate out-of-court bankruptcy proceedings. The creditor, being duly informed and objecting to out-of-court bankruptcy proceedings, (has the right) may initiate a judicial dispute which would in principle prevent the initiation of such bankruptcy proceedings.
TGS Baltic associate partner Žydrūnė Stuglytė, associate Patricija Rukštelytė and junior associate Lukas Radzevičius assisted the client on all legal issues.