Croatia Seeking clarity in distress
Anita Krizmanic, Ivana Manovelo and Jelena Zjacic of Macesic & Partners explore Croatia’s evolving framework for dealing with struggling companies
IFLR: What are the main insolvency provisions under Croatian law? Croatian law has traditionally been familiar with three insolvency tests: illiquidity, inca- pacity to pay and over-indebtedness. The Croatian legislature has also introduced, effec- tive from October 1 2012, a previously non-existent restructuring law, the Pre-bank- ruptcy Settlement Act. The purpose of the new law is to ensure, as far as possible, the survival of the business of a debtor meeting at least one of the insolvency tests. The Croatian courts recognise foreign bankruptcy proceedings, pre-insolvency pro-
ceedings, restructuring proceedings or any other similar proceedings (the number of the proceedings which may be recognised is not a reserved number). The legislative framework for cross-border cooperation in insolvency proceedings is
well prepared and effective. However, the practice is very rare to almost inexistent. It is expected that from July 1 2013, when Croatia is scheduled to become a new EU mem- ber state, the number of cross-border cases requesting cooperation will rise significantly.
How do these new restructuring proceedings work and what are the main goals? There are two goals set by the new Pre-bankruptcy Settlement Act in restructuring pro- ceedings: business turnaround of insolvent debtors, and more favourable settlement of creditors than in the bankruptcy proceedings. If the restructuring process fails, the debtor is faced with bankruptcy proceedings. Only the debtor is authorised (and has the obligation) to file a motion for restructur-
ing under the Pre-bankruptcy Settlement Act. Pre-bankruptcy proceedings cannot be initiated on a creditor’s request. A creditor’s only option, in case a debtor fails to initiate the pre-bankruptcy proceedings, is to file a request for the debtor’s bankruptcy proceed- ing.
The parties to the restructuring proceedings are the debtor and creditors who have
reported their claims. The restructuring proceeding is an administrative proceeding con- ducted before the Croatian Financial Agency (FINA). Two administrative bodies should be established in each proceeding: the settlement committee and the settlement trustee. If the restructuring plan is accepted and the debtor and creditors reach a pre-bankrupt- cy settlement agreement, the agreement is concluded before a competent commercial court, according to the debtor’s registered seat. A decision on the opening of proceedings must be immediately published on FINA’s
website. Simultaneously, FINA publishes a call to the creditors to report their claims in a pre-bankruptcy proceeding within 30 days. The restructuring proceeding costs, which include administrative and court taxes, set-
tlement trustee fees and costs and so on, should be borne by the debtor. They depend on the total value of the debtor’s debts and amount up to approximately €2,000 ($2,700).
www.iflr.com IFLR|RESTRUCTURING & INSOLVENCY 013
proceedings, it is unclear whether one creditor may dispute another creditor’s claim
“ ” In restructuring
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