Latvia to disband insolvency oversight body, split its duties among three institutions

Starting October 1, Latvia's Insolvency Control Service (MKD) will be liquidated, with its responsibilities transferred to the Ministry of Justice, the Court Administration, and the Latvian Insolvency Proceedings Administrators' Association. Anda Smiltēna, deputy state secretary at the Justice Ministry, explained the reasoning behind the reform in an interview.

A sector brought into order

According to Smiltēna, the decision reflects a broader push for a smaller, more efficient state administration — MKD was a relatively small agency employing around 60 people. The ministry believes the insolvency sector, once plagued by corruption scandals and criminal cases roughly ten to fifteen years ago, has since been substantially cleaned up. The number of licensed insolvency administrators has dropped from about 350 to 130 over that period, which officials attribute to intensive oversight, repeated qualification exams, and a disciplinary system that pushed out dishonest actors.

Dividing the responsibilities

The Justice Ministry will retain oversight of administrators, including their appointment and dismissal. The Court Administration will take over handling employee claims for payments from the employee claims guarantee fund in cases where an insolvent employer owes wages, and will continue maintaining the Electronic Insolvency Registration System (EMUS). The administrators' association has been assigned to organize qualification exams and review ethics violations, while disciplinary cases will still be handled by an inter-agency commission including representatives of the ministry, the association, and the Supreme Court.

Figures and next steps

Earlier this year, 1,292 insolvency proceedings were initiated for individuals and 872 for legal entities, while only 127 legal protection proceedings were launched. The ministry plans to propose amendments to speed up insolvency proceedings and allow faster satisfaction of creditor claims in disputed cases, as well as address the problem of so-called "empty" insolvency cases, where unsecured creditors typically recover only about 5% of their claims. Separately, parliament is preparing amendments that would remove insolvency administrators from the scope of anti-money laundering legislation, since the sector's risk level has been assessed as medium-low.