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Justice minister wants to put end to irresponsible business practices

Urmas Reinsalu.
Urmas Reinsalu. Source: (Siim Lõvi/ERR)

Minister of Justice Urmas Reinsalu (IRL) has presented a proposal to the cabinet for measures that could be taken to curb the use of straw men as board members of troubled companies, and to improve business culture in general.

"Entrepreneurs acting irresponsibly, who liberally leave their liabilities accrued in the course of economic activity to be borne by creditors, pose a serious problem which requires a conclusive solution. There are about 700 straw men active in Estonia now in whose 'possession' there are more than 10,000 companies with a total debt of €355 million. This problem cannot be solved by one ministry alone, we need the support of all other ministries, the ministries of economic affairs and finance in particular," Reinsalu said in a press release.

The package of measures put forward by the Ministry of Justice includes imposing additional requirements for management board members of companies, such as a complete ban to serve in that position for persons a company under whose management has not filed its annual report by the established deadline. A ban should also be imposed on individuals who are board members in a company the bankruptcy proceeding of which is terminated by abatement without declaration of bankruptcy and the bankruptcy petition was not filed by the debtor itself.

Another potential measure would ban the transfer of title to a company or a part thereof if the company has not fulfilled the reporting requirement. Furthermore, people in jail or detention would be barred from membership of the management board or supervisory board of a company.

"I wish to get feedback from fellow members of the Cabinet on whether the proposed measures will help make the behavior of debtors in different fields more responsible, while not having an excessive impact on honest companies which suffer as a result of commercial misfortune," he said.

The measures are intended to combat the practice where, in the event of financial difficulties, all liquid assets of a business are removed from the business and title to the business is then transferred to a third person, a so-called straw man, who clandestinely offers the service of "euthanasia" of businesses.

The government decided to task the Ministry of Justice to start the procedure of drafting legislative amendments on the basis of the said proposals.

Editor: Dario Cavegn

Source: BNS

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