Croatia
of goods, payment of VAT and other taxes, and employee’s salaries. If approved by the settlement trustee in the restructuring pro- ceeding, other payments may be performed as well; however, in no case may one credi- tor be put in a more favourable position than the other. The restructuring legislation is newly adopted and at this point there are no indications that it might change in the near future.
How are creditors grouped in Croatian restructuring proceedings, and what rights do they have? Creditors are divided – based on the quality of their claims – into three groups: creditors with priority claims (employees); creditors with secured claims; and creditors with non- secured claims. It should be noted that employees have a
very interesting position in the restructuring proceeding. Namely, although their salaries are settled as priority claims, employees are not creditors in the proceeding; they do not report their claims and do not have voting rights. For voting purposes, the creditors may be
grouped into at least three categories (but there may be more if necessary): state-owned companies and public administration; finan- cial institutions; and other creditors. The restructuring plan is adopted if
accepted by the creditors whose claims amount to more than half of total claims in each group of creditors or if accepted by the creditors whose claims amount to two-thirds of total claims, regardless of the group. If creditors fail to report claims in the
restructuring proceeding, they lose their right to collect the claim in a litigation, enforcement or administrative proceeding
against the debtor. The question arises whether this applies to possible bankruptcy proceeding as well (if restructuring process fails). In our opinion, it should be interpret- ed that such creditors are allowed to report their claims in the bankruptcy proceeding based on the principle “everything which is not explicitly forbidden by the law is allowed”.
What are the allowed financial restructuring measures? In Croatia, financial restructuring measures include but are not limited to: postpone- ment of payment dates, increase of share capital, instalment payments, interest decrease or write-off, loan rescheduling, pro- viding additional security instruments, refi- nancing from strategic partners. Derivatives and any other measures that would achieve the restructuring goal are allowed.
How do Croatian bankruptcy pro- ceedings work and what are the main issues? The goal of bankruptcy proceedings is to jointly satisfy creditors’ claims by sale of debtor’s assets and distribution of proceeds among creditors. The exemption to the gen- eral goal is reorganisation of debtor in bank- ruptcy which may take place under a very limited framework, in order to regulate debtor’s legal status, its relations with credi- tors and especially in order to preserve its business activity. A decision on opening of bankruptcy
proceedings must be announced on the court’s notice board on the same day the court passes its decision on the debtor’s bankruptcy. It must also be published in the Official Gazette of the Republic of Croatia.
Under the Croatian Bankruptcy Act,
both the debtor and its creditors are autho- rised to file a motion for bankruptcy. The parties to a bankruptcy proceedings
are the creditors and debtor. The bodies involved in a bankruptcy proceeding are the bankruptcy judge, the bankruptcy trustee, the creditor’s assembly and the creditor’s committee (the latter not being obligatory). The bankruptcy proceeding is conducted exclusively before the competent Commercial Court. Competence is deter- mined on the ground of the debtor’s regis- tered seat. Considering the main purpose and goal of the bankruptcy proceeding is to satisfy creditors’ claims, the court adminis- tration does not need to balance the interests of creditors and debtors. This comes into question only if reorganisation in bankrupt- cy takes place, to which creditors have con- sented. The estimated bankruptcy proceeding
costs by type and amount are as follows: • Court costs: up to €5,000; • Attorney’s fees and costs: between €10,000 and €15,000; this depends on the number and the value of dispute of pending litigations that attorneys handle for the bankruptcy debtor and other legal services required in the bankruptcy pro- ceedings;
• Bankruptcy trustee fees: up to €40,000; • Members of the creditors’ committee fees and costs: subject to Court’s order: approximately between €5,000 and €15,000; and
• Other bankruptcy proceeding costs pro- vided by law, for example 5% property transfer taxes (amount depends of the property value). The main issue relating to the Croatian
About the author Jelena Zjacic regularly advises on M&A deals and is experienced in conducting due diligence for clients. Her second main area of work is banking and finance where she has successfully handled many ship finance and infrastructure finance deals. She has also been focusing on insolvency and restructuring law, which forms an important part of her advisory work in restructuring deals and debts collection matters for both domestic and international clients. Zjacic started her legal training with the Municipal Court in Rijeka and then joined Law Offices Macesic & Partners in 2004. She is a member of the
Croatian Bar Association and International Bar Association, as well as a licensed Court Interpreter for English. She is author and co-author of a number of contributions and reviews for the International Lawyer of ABA’s Section of International Law.
Contact information
Jelena Zjacic Macesic & Partners
Pod Kastelom 4 PO Box 366 51 000 Rijeka T: +385 51 215 010 F: +385 51 215 030
www.iflr.com
IFLR|RESTRUCTURING & INSOLVENCY 015
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