Three important questions for every entrepreneur:
1. What if your company is facing temporary financial difficulties, but you have a plan to overcome them?
2. How to protect your business from creditor claims without going bankrupt?
3. Is there a legal way to “freeze” debts and gain time to restore solvency?
The answer to all these questions is TAP (Tiesiskās aizsardzības process) or Legal Protection Process in Latvia.
What is TAP in simple terms?
The Trade Asset Protection Process (TAP) is a legal procedure that allows a company in financial distress to obtain protection from creditors and time to restore its solvency. It is not bankruptcy, but rather a means of protecting and “restarting” the business.
Think of TAP as a “time-out” in sports—when a team takes a break to reassess its strategy and return to the game with renewed vigor. Only in this case, the “game” is your business, and the “new strategy” is a plan to restore financial stability.
The main goal of TAP is:
Restore the company’s ability to meet its obligations to creditors while preserving business and jobs.
Who can use TAP?
TAP is available for:
Legal entities (LLC, JSC and others)
Personal societies
Individual merchants
Foreign companies with permanent operations in Latvia
Agricultural producers
Important: TAP can only be initiated by the debtor. Creditors cannot force this process.
What are the benefits of TAP?
- Instant protection from creditors
From the moment the application for TAP is filed with the court, the company receives a “protective shield”:
| What stops | Practical meaning |
|------------------------|---------------------------|
| Enforcement proceedings | Bailiffs stop collection |
| Sale of mortgaged property | Banks cannot take back collateral |
| Filing for Bankruptcy | Creditors Cannot Initiate Bankruptcy |
| Company liquidation | Liquidation proceedings are suspended |
| Accrual of fines and penalties | Debt stops growing |
- Time to develop a rescue plan
The company is given 2-3 months to develop a recovery plan without pressure from creditors.
- Mandatory for all creditors
A court-approved TAP plan is binding on all creditors, even those who voted against it.
- Maintaining control over the business
The company’s management continues to manage the business, but under the supervision of a designated person.
How TAP Works: A Step-by-Step Process
Step 1: Submitting an application (1 day)
The company files a lawsuit to initiate TAP.
The court considers the application and makes a decision to begin the process.
Stage 2: Protective period (2-3 months)
Protection from creditors begins automatically
The company is developing a recovery plan
The plan should include:
A realistic assessment of the financial situation
Debt restructuring methods
Income and expense forecasts
Debt repayment schedule
Stage 3: Coordination with creditors
The plan is submitted to creditors for consideration.
To be approved you need to get support:
2/3 of the amount of claims of secured creditors
More than half of the total claims of unsecured creditors
Stage 4: Court Approval
The court appoints a supervising person
The court is reviewing the legality and feasibility of the plan.
If the decision is positive, the plan becomes mandatory.
Stage 5: Implementation of the plan (up to 4 years)
The company is implementing the approved plan
The supervising person controls the process
Upon successful completion, all debts are considered settled.
Who is TAP especially useful for?
1. Companies with temporary difficulties
Seasonal business with temporary reduction in income
Companies affected by force majeure
Businesses with short-term liquidity problems
2. Enterprises with promising business
Companies with good long-term prospects
A business requiring restructuring but not liquidation
Enterprises with valuable assets or technologies
3. Socially significant enterprises
Companies with a large number of jobs
Enterprises important to the local economy
Business with social responsibility
A practical example of using TAP
Situation: A manufacturing company with a turnover of €2 million per year is facing temporary difficulties due to the loss of a major client. Debt amounts to €500,000, but the company has orders for next year worth €1.5 million.
Without TAP: Creditors sue, bankruptcy begins, the company is liquidated, 50 people lose their jobs.
With TAP:
-
The company receives protection from creditors for 3 months
-
Develops a plan to pay off debts within 2 years
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Creditors agree to restructuring
-
The company is recovering and fully paying off its debts
-
Jobs and businesses are preserved
Important conditions for a successful TAP
Mandatory requirements:
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Realistic Recovery Plan - Fantasy Doesn’t Work
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Support for creditors - you need to convince them of the prospects
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Honesty and transparency - hiding information is unacceptable
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Professional training - it is better to involve specialists
TAP will NOT help if:
The company has effectively ceased operations.
There are no real prospects for recovery
Debts exceed the ability to repay within a reasonable time frame
Management is not prepared for management restrictions
Alternative: Extra-judicial Legal Protection Process (ĀTAP)
For companies that can reach an agreement with creditors without going to court, there’s ĀTAP—a simplified version of TAP that avoids court proceedings. It’s faster and cheaper, but requires the consent of all creditors.
Practical advice from experts
When to consider TAP:
Debts make up 20-50% of annual turnover
There is a clear plan for business recovery
Temporary difficulties, not a systemic crisis
Support from key creditors is likely
How to Prepare for TAP:
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Conduct an honest analysis of your financial situation
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Develop a realistic business plan for recovery
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Prepare documents on activities and debts
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Consult specialists – lawyers and financial consultants
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Start informal negotiations with key creditors
Conclusion
TAP is not an admission of defeat, but a strategic tool for preserving and restoring a business. In a climate of economic instability, this may be the only way to avoid bankruptcy and preserve years of work and investment.
The key is to act proactively. The sooner you apply for TAP when financial difficulties arise, the greater your chances of successfully recovering your business.
Remember: TAP requires a professional approach and honesty with creditors. This is not a way to avoid responsibility, but an opportunity to fulfill your obligations under the new circumstances.
Contacts for consultations
If your company is facing financial difficulties, don’t delay resolving the problem. The Riga Arbitration Court is ready to provide professional advice on debt restructuring and alternative dispute resolution.
Phone: +371 67 50 8014
Email: info@court.lv
Address: Kaleju Street 24, Riga, LV-1050
Disclaimer: This publication is for informational purposes only and does not constitute legal advice, a recommendation for action, or a guarantee of a successful outcome. Each situation is unique and requires individual analysis. The Riga Arbitration Court shall not be liable for decisions made based on the information in this article. Before making any decisions regarding TAP, it is strongly recommended to obtain professional legal and financial advice from qualified professionals. The information in this article is based on current legislation at the time of publication and is subject to change.