According to TGS Baltic attorney Vytis Grybauskas, currently, the state-issued support has no safeguards and thus it can be arrested or debt repossessed. In response to this, the Seimas has begun discussions on the Code of Civil Procedure amendments proposed by the Ministry of Justice. According to the attorney, the amendment would prohibit the arrest of funds the debtor received from the state or municipal support, compensations, or pay-outs due to the emergency situation or lockdown. It will also be prohibited from performing repossessions on such funds.
Only part of the problem resolved
However, it appears that the new regulations would only partially allow companies to protect aid received from the government, and there would still remain possibilities to circumvent the law and appropriate the received funds.
“The necessity for such changes is understandable because creditors can currently take over state aid, which was perhaps aimed at paying for staff downtime, which the employer must cover, or to pay rent through rent compensation. On the other hand, the proposed regulation only partially resolves the existing problem because the restrictions on appropriating such funding would only apply when repossessing through bailiffs,” V. Grybauskas says.
According to bailiff Arminas Naujokaitis, such restrictions on solely repossession performed by bailiffs show flaws in the new regulations: “The aforementioned regulation might be unbalanced because it distinguishes repossession not based on from whom and under what circumstances it will no longer be possible to repossess, but on what subject will no longer be able to perform repossession. In this case, repossession performed by bailiffs will be prohibited, but by other institutions, it won’t.”
Subsidy recipients not included in the lists of affected companies will remain unprotected
It is not only creditors, but also the State Tax Inspectorate who will be aiming for such support. While the State Tax Inspectorate and Sodra will not repossess taxes from companies facing difficulties due to COVID-19, it is important to note that not all companies receiving aid, for example staff subsidies, are on the affected company lists. If the company is not on such a list but receive subsidies, the new legislative changes will not offer them protection and the risk will remain that state support for staff for downtime might not reach staff, instead of going to the VMI.
A lot of room for interpretation
Lastly, according to V. Grybauskas and A. Naujokaitis, the question of how to distinguish what funds are aid that cannot be repossessed and what is the company’s other funds, is not resolved.
“Just like grain, money is not notable for showing any exclusive traits which would allow distinguishing one euro from another, especially when it lies in the same bank account. Thus, if you have 2 euros in your bank account and you received 1 euro in support, the question emerges, which euro is the support, and which is not. Furthermore, individuals will always be able to spend their funds while leaving a remaining analogous sum to the received support and interpret this as state support – in such a case, it will not be possible to arrest or write off such funds,” the attorney says.
A. Naujokaitis echoes this sentiment in that trying to distinguish which funds in the aid recipient’s account is untouchable state aid will inevitably lead to an increase in disputes.
The experts believe that the desire of legislators to protect citizens is laudable. However, in order for the desired result to be achieved, a wider view and discussion of the aforementioned challenges is necessary.
