RESTRICTIONS ON THE PARTICIPATION OF DEBTOR-RELATED CREDITORS IN BANKRUPTCY PROCEEDINGS: IS THERE A NEED FOR A NEW APPROACH IN ESTONIAN LAW?

Abstract

In bankruptcy proceedings, creditors have three main active procedural rights: 1) to submit a proof of claim; 2) to vote at a general meeting of creditors; 3) to satisfy the claim. However, some countries have adopted regulations that specify which creditors are allowed to participate in the proceedings. Such creditors are debtor-related persons, especially shareholders with subordinated loan claims. The Estonian Bankruptcy Act does not provide any regulations governing the participation of debtor-related creditors in the proceedings. Therefore, debtor-related creditors could control the bankruptcy proceedings and the activities of the trustee during a bankruptcy, which harms the rights and interests of non-related creditors. The article aims to find answers to the questions: Should the law provide restrictions on the participation of the debtor-related creditors in bankruptcy proceedings in order to ensure the protection of the parties’ rights and interests, and should shareholders have a right to active participation in bankruptcy proceedings with a subordinated loan claim? This article attempts to find answers to these questions by comparing Estonian, German, Latvian and Lithuanian law.