Published: 2020-08-17 16:15:00 CEST
Pro Kapital Grupp
Company Announcement

AS Tallinna Moekombinaat contests the ruling of the County Court regarding the reorganization plan


AS Tallinna Moekombinaat contests the ruling of the County Court with which the court decided to terminate the proceedings prematurely.

On 3 April 2020, AS Pro Kapital Grupp (Pro Kapital) announced the initiation of reorganization proceedings of its subsidiary AS Tallinna Moekombinaat. On 15 June 2020, Pro Kapital announced that the court has appointed experts to evaluate the plan, who must submit their opinion on the reorganization plan by 22 July 2020 at the latest, and that the court would decide on the approval of the plan by 10 August 2020 at the latest. On 30 July 2020, Pro Kapital notified that the Tallinn District Court had annulled the ruling of the county court in connection with the appointment of experts and referred the matter back to the county court for a new decision.

On 14 August 2020, the county court has made a new ruling in the matter. The county court has terminated the reorganization proceedings because it has established that AS Tallinna Moekombinaat is allegedly permanently insolvent.

AS Tallinna Moekombinaat disagrees with the views expressed in the 14 August 2020 county court ruling and intends to dispute it.

Both experts appointed by the court in the reorganization proceedings have thoroughly analyzed the economic situation of the company and concluded that the company is not permanently insolvent and the problems can be overcome with the help of the reorganization plan.

Also, during the reorganization procedure, the company's financial results have been better than those outlined in the reorganization plan, all the company's ongoing obligations have been fulfilled and the company continues to fulfill new obligations.

AS Talinna Moekombinaat is of the opinion that the respective approach of the county court contradicts both the logic of the Reorganization Act and the previous practice of the Estonian Supreme Court. Reorganization as such loses its meaning, if the court makes a decision without evaluating the reorganization plan. Such case law sends the wrong signal to companies in a similar situation, and instead of rescuing companies, bankruptcy proceedings can be easily chosen, which creates a lot of uncertainty and puts creditors at a disadvantage.

Amongst other things, the Supreme Court has taken the position that in reorganization a distinction must be made between permanent insolvency of an undertaking and its temporary insolvency, which can be overcome by reorganization proceedings, i.e. until the undertaking can be reorganized, the undertaking cannot be permanently insolvent.

If the decision of the county court remained in force, the reorganization procedure would become completely impossible, as reorganization would be ruled out in case of insolvency of any kind, because on the one hand a company cannot be reorganized without insolvency and, on the other hand, companies with payment problems cannot be reorganized.

According to the position of AS Tallinna Moekombinaat, the county court has insufficiently analyzed and assessed the arguments and evidence submitted by AS Tallinna Moekombinaat. AS Tallinna Moekombinaat has provided the court with statements and evidence which clearly show that the payment difficulties of AS Tallinna Moekombinaat are temporary.

AS Tallinna Moekombinaat has the opportunity to contest the ruling within 15 days from its delivery and AS Tallinna Moekombinaat intends to do so. AS Tallinna Moekombinaat has also challenged the ruling of the district court on which the ruling of the county court is based. During such disputing, the reorganization proceedings shall continue and the consequences of initiating the reorganization proceedings shall continue to apply to AS Tallinna Moekombinaat.

The 14 August 2020 ruling of the county court does not in any way affect the day-to-day operations of the T1 Mall of Tallinn.

For further comments, please contact:

Jaanus Mody
Partner at Law Office Cobalt
+372 501 5407
jaanus.mody@cobalt.legal

Allan Remmelkoor
Member of the Management Board
+372 614 4920
prokapital@prokapital.ee