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1 January 2010 was the date of entry into force of a new Bailiffs Act which established, for the first time in Estonia, a joint professional chamber of bailiffs and bankruptcy trustees and amended, among other acts, the Bankruptcy Act.

Some examples of the new Bailiffs Act and the 151 amendments to the Bankruptcy Act are presented below:
Similar to the Estonian Bar Association, the Chamber of Bailiffs and Bankruptcy Trustees has been established pursuant to law as a legal person in public law. In accordance with the Act the tasks of the Chamber include, for example, promotion of professional activities of bailiffs and bankruptcy trustees, incl. conduct of examinations for bailiffs' assistants and bankruptcy trustees, conduct of trainings, organisation of in-service training and checking the performance of the in-service training obligation. Earlier any issues related to organisation of examinations were within the competence of the Ministry of Justice. Furthermore, other more important amendments related to the competence of the Chamber include supervision of professional activities and dignified behaviour of bailiffs and bankruptcy trustees as well as checking the existence of the professional liability insurance of bailiffs and bankruptcy trustees.

Certain additional synergy will hopefully be received as a result of the Chamber's activities in organising the keeping of a joint warehouse of movable property to be sold in execution and bankruptcy proceedings, the development and management of information systems required for the work of bailiffs and bankruptcy trustees and the organisation of management of documents subject to archiving. According to law, an electronic auction environment will be introduced by no later than 1 January 2013. The effective management and cooperation of the Chamber will be placed within the competence of the following eight bodies: occupational union, professional union, council, board of the occupational union, board of the professional union, examination board, audit committee and court of honour. According to the Ministry of Justice, a person designated by the Ministry of Justice will be responsible for the management of the Chamber until the election of the council and the boards of the occupational union and the professional union of the Chamber.

In accordance with amendments to the Bankruptcy Act, a bankrupt debtor may only be deemed to be such a person with regard to whom the court has declared bankruptcy. In accordance with the draft, the amendment was necessary due to the fact that the term "commencement of bankruptcy proceedings" was abolished and replaced by "appointment of an interim trustee". The reason behind the desire to relinquish the "commencement of bankruptcy proceedings" is to avoid the labelling of a person as bankrupt before the declaration of actual bankruptcy. Such labelling may bring along negative economic consequences for the debtor, particularly in cases where an unjustified bankruptcy petition is filed. Negative consequences arise from the dismissive attitude of the society to the bankrupt person - there is a strong likelihood that most economic relations will break off and there will be no other possibilities for the person (who was able to cope before the bankruptcy petition) than to go bankrupt.

From this year on, instead of a ruling made about commencing bankruptcy proceedings, such proceedings will now start with the declaration of bankruptcy. The commencement of bankruptcy proceedings will be made equal to the declaration of bankruptcy. This amendment will also inter alia remove the confusion in the context of cross-border insolvency proceedings where it was not quite clear which judicial decision the court of a foreign state had to automatically recognise in the case of insolvency proceedings in Estonia.

However, in the light of the new wording we could also look at the applicable Reorganisation Act which refers, in quite a lot of important issues, to bankruptcy proceedings commenced with regard to an undertaking and which, as of the entry into force of the amendments to the Bankruptcy Act, may take on a different substantial and legal effect - at least as long as the Reorganisation Act is amended in turn.

Following the example of the German Insolvency Act (1999), for the first time the provisions of the proceedings for the release of a debtor who is a natural person from obligations (known also as Chapter 11 of the Bankruptcy Act) have taken effect in Estonia in 2004.

In other developed countries the respective provisions for alleviating the burden of debt of natural persons had existed for a long time, e.g. in Denmark since 1984, in France since 1989, in Finland and Austria since 1993, in Norway and Sweden since 1994, in the Netherlands since 1997 and in Belgium since 1998. After having waited for six years, in January these provisions entered into force with regard to debtors who are natural persons which, under certain circumstances, also allow proceedings for release from debt in the case of abatement, i.e. if the debtor is insolvent, but his/her assets are insufficient to cover the costs of the bankruptcy proceedings and it is impossible to recover or reclaim the assets or if the satisfaction of the claims is unlikely. Up to now the applicable principle was “are you rich enough to go bankrupt?”, as in the event that the abatement of bankruptcy proceedings took place before the declaration of bankruptcy, it was impossible for a debtor who is a natural person to get involved in the proceedings for the release from debt.

As a result of an amendment to the Bankruptcy Act, the principle prevalent in bankruptcy proceedings that the proceedings for the release from obligations can only be conducted in the case of such natural persons who have assets that are at least sufficient to conduct bankruptcy proceedings will be relinquished. A petition for commencement of proceedings for the release from obligations may be filed by the debtor who is a natural person by filing a bankruptcy petition or after a bankruptcy petition filed by the creditor or, in addition, before the first general meeting of creditors or during bankruptcy proceedings when the court begins the termination of bankruptcy proceedings due to abatement.

Thus, it is possible for the debtor to file a petition at almost any time (before as well as after the declaration of bankruptcy). A positive side to proceedings for the release from obligations applicable up to now was the motivation of people to deal with their debt and file a bankruptcy petition early enough. However, the procedure applicable to date included a shortcoming, as a person who no longer has assets lacks the motivation to strive for a “new and better life”. The reason was that within thirty years creditors could take away all of the assets acquired by the debtors. In accordance with the explanatory memorandum to the draft, the new act is based on this value judgement. The question which may arise here is: is there not a danger that a person who has caused his/her insolvency intentionally will be released from his/her obligations?

However, it is hoped that this problem will be avoided via a filter mechanism, i.e. both the prerequisites of the regulation of the proceedings for release from obligations for conducting proceedings and supervision will be more stringent.

The reason the Estonian Development Fund was established as a provider of venture capital is even more valid today than it was at the time of the fund’s establishment – the need to create a firm basis on which to support and strengthen Estonia’s long-term growth and its competitive position internationally.

The provision of early and growth-stage venture capital has a significant role to play in generating a critical mass of companies with international growth ambitions in the country. Only by developing business models which are capable of competing against others and which offer considerable added value will Estonia be able to make the most of the therapeutic effect of the recession, modify the structure of its economy and emerge from the financial crisis as a winner.

We have found ourselves in a situation where the country lacks courageous entrepreneurs striving for international growth. One of the major challenges facing the Estonian Development Fund is to develop the venture capital market so that it produces significantly more innovative and uniquely competitive technology-based business ideas, entrepreneurs and businesses which are all worthy of investment.

We also need to ensure that these entrepreneurs are willing and able to raise more than just money. They often have the technological potential (offering a product or solution), but fall down when it comes to marketing their products or services, outlining their strategies and financial prospects and raising capital. But what venture capitalists do is match new technology or new business models to management experience and networks which allow us to capture and secure ourselves a place on the global market.

Since Estonia has no particular advantage or pull factors to offer as a growth environment for companies with international focus which would entice entrepreneurs to the country and thereby increase the number of business projects attractive to venture capitalists, available investment capital is instead being channelled outside of Estonia into projects with growth potential. It is a catch-22 situation. You need two things for growth: capital to invest and attractive businesses to invest in. In Estonia the capital investments of smaller private investors need pampering, as the majority of such investors lack the knowledge and/or the courage to make initial investments in IT or biotech start-up companies. They prefer more traditional branches of industry with more tangible assets.

The Estonian Development Fund encourages the market to broaden its horizons, itself making direct investments in early-stage high-risk start-up companies with a stronggrowth potential and boosting the market's willingness and ability to invest generally by promoting co-investors and implementing best practice. This last one is something from which both the start-up phase of traditional (manufacturing) industry and companies in need of ‘re-start-up' or restructuring win. By encouraging private investors to invest and entrepreneurs to move towards far-reaching growth, ‘lifestyle (over-the-corner) businesses' will also change their tune and look to faster growth and a bigger market.

The long-term effect of venture capital on the economy as a whole can be seen in the example of its biggest market – the United States. The companies which received early-phase venture capital between 1970 and 2005 currently employ approximately 10% of the country’s private sector workers, who account for 17% of GDP. Many business operators who were given a shot of venture capital doubt whether their companies would ever have gotten off the ground, or developed at any more than a snail's pace, without it.

The best examples of venture capital investment internationally are Cisco, Starbucks, Google, eBay, Apple and Skype, while the venture investment of the U.S. Small Business Administration Investment Division has led to an explosion of stars like Compaq, Staples, Intel, Sun Microsystems and FedEx. The experience of the United States, which is at the forefront of the venture capital market, shows that in terms of growth, companies financed through venture capital have consistently outshone those that went without a shot of smart money.

In order for Estonia to reach a middling sort of footing in European terms, at least 0.1% of GDP - between 200 and 250 million kroons - must be invested as early-stage venture capital annually. (The figure in the United States is 2% of GDP annually.) Since the average length of time from raising venture capital to exiting an investment is between 5 and 7 years, the volume of early-stage investment funds in the country should be between 1 and 1.5 billion kroons, provided, for the most part, by funds with reliable cornerstone investors which are based on private capital. In a recession any kind of capital offer is going to be restricted, but early-stage access to capital creates the foundations needed for sustainable new companies and a basis for subsequent, later-stage private sector investments. You reap what you sow: if you don't plant the seed, it will never bear fruit.

As of August 2009 the Estonian Development Fund had made five early-stage investments, pouring almost 36 million kroons into business models with international breakthrough potential. Three of these investments have been made in the last nine months. This is more than any other private sector early-stage capital provider invested in Estonian companies in the same period. By the end of 2009 our investment portfolio is likely to include as many as nine growth companies. Although you do find competitive business models in all branches of industry, the world is primarily seeing new sources of growth in ingenious IT applications, clean energy and the life sciences.

In order to generate more ambitious companies in which to invest venture capital, the Estonian Development Fund has founded a virtual incubator of international business called SeedBooster, in which start-up companies are prepped for investment by consulting and advising the entrepreneurs and developing their plans for growth. Five seed-phase business projects are currently being incubated in SeedBooster under the watchful eye of our investment experts.

The Estonian Development Fund is continuing to look for talented entrepreneurs to open the door to, as well as forward-thinking investors with whom to make big, bold investments.

heidi.kakko[A]arengufond.ee, Head of Investment Division

I am jotting down a few observations I have made at conferences and daily work in the course of the past months. At last, it was elaborately said in the parliament that innovation is not really an economic term, rather it is a matter of culture. This has to be nurtured from kindergarten: children have to be taught to think creatively, all the more, they need to be encouraged to learn from mistakes.

Regrettably, the whole of Europe has difficulties with such an upbringing. The paradox of the Old World lies in the fact that there are two things that are really loathed: failure and big success. And we are not in a much better situation. In this regard, the media has a big role to play in developing values. If we want to catch up with Old Europe and promote innovativeness, we will have to try to think more in the American way. In the land of opportunities, failure is looked upon as a learning possibility, and it is actually a person's third business that is considered  successful.

In spite of the surrounding crisis we in the Development Fund's investment division see positive tendencies: the quality of business plans and investment proposals has increased. There are still too few ambitious and globally oriented projects in Estonia, but those that do exist are more carefully thought out. However, the things persistently in short supply are international sales and marketing competences, which often have to be sought across the ocean. If most potential customers are in North America, only people who have lived on that continent, who have contacts and breakthrough experience can organise sales to these clients. Hence, in order to achieve an international breakthrough, we have to contemplate how to cross-breed Estonian ideas and technologies with international sales and management competencies. Mutual co-operation and strategic partnership with agents should also be considered when reaching out to foreign markets. For example, for each dollar that Microsoft makes, its partners are said to make eight.

In the past months we have received a project or two a week. All in all, during slightly more than 18 months we have examined some 160 projects. In reality, just about half of the projects possibly have an international growth potential and of these 50 per cent are more mature, elaborate and realistic. In a month, we get some three co-investment requests from angel investors, affluent individuals and foreign investment companies.

By and large, considering the future opportunities of the Estonian economy, I tend to believe more in growth areas than in specific sectors. For example, we talk about environmental and sustainable energy products and services, which are on the rise in the world also during the crisis and offer opportunities to companies in many different sectors. The same is true for health and welfare products and services. This sector, too, is growing owing to the aging population in rich countries and the budgetary pressures. This area also holds opportunities for many companies in the private as well as (surprise, surprise!) the public sector. Health care services will be promoted more actively across borders and health care technologies and telemedicine equipment will be sold along with health capsules and tubs, ergonomic furniture, artificial joints, health promotion services, rehabilitation, eye surgery, dental care, smart clothing, e-health solutions, etc.

Should the government contribute more and encourage entrepreneurs to look more actively for unconventional ways of making money? Yes, absolutely. The astuteness to find a profitable section in a production or service chain is of key importance to each and every company. The government, too, has to be smart and figure out those big buttons it has to press so that the society and the entrepreneurs would be naturally innovative and capable of spotting breakthrough opportunities. Meanwhile, the impact is bigger the earlier one "presses the button". We have to be decisive in making our higher educational system international. We have to see to it that a business student, a technocrat and a designer would already write course papers together at school. Also, the first priority in basic education should be maintaining and developing children's creativity and problem-solving.