Formation of Creditor Groups in Reorganisation Proceedings: Does Estonia Need a Better Regulation?
The Estonian Reorganisation Act (RA) entered into force on 26 December 2008. In a comparison to the legislation of other states discussed in the article, the Estonian law is one of the few that do not provide clear rules on the formation of creditor groups for voting purposes, and no widespread court practice can be cited. In current practice, debtors rarely form groups that would be consistent with the creditors’ rights and interests. However, doing so would ensure equal treatment for the creditors while also protecting the interests and rights of the debtor; in turn, this ensures adoption of a reorganisation plan and effectiveness of reorganisation proceedings.
The legislator should prescribe clear provisions in the RA stating that the debtor should form voting groups when the creditors differ in their legal status and economic interests. Those creditors are secured and unsecured creditors. However, a preferential right is appropriate only to the extent to which the claim is secured. Debtor-related creditors too should vote in a separate group, especially with subordinated claims. With respect to other debtor-related creditors, verification should be obtained in each case wherein they differ in their legal status and interests.