acceleration begin only after the actual declara- tion of bankruptcy proceedings, as these pro- ceedings are publicly disclosed in the Commercial Bulletin and thus the debtor itself is aware of such proceedings. Already the commencement of bankruptcy
proceedings itself has serious legal effects on the entrepreneur’s assets and state of business affairs, as the entrepreneur is immediately obli- gated to limit activities to the everyday legal acts essential to keep the business afloat – which do not include acts such as establishing a company or acquiring interest in another undertaking, conveying real property or other valuable property of the company, or conclud- ing loan or credit agreements. On the other hand, the commencement of bankruptcy pro- ceedings gives the entrepreneur immunity from enforcement and no enforcement action can be exercised over its assets. If the debtor does not prove to the court its
ability to pay, the court can decide whether it will automatically declare bankruptcy over the entrepreneur, and designate a ordinary bank- ruptcy administrator, or whether the court first designates a preliminary bankruptcy adminis- trator, who will ascertain whether the entrepre- neur’s assets amount to at least €6,638.78 (or €1,659.70 for a natural person) so that bank- ruptcy can proceed. Both the ordinary and pre- liminary bankruptcy administrator are ran- domly selected by the court from the database of administrators through the electronic sys- tem. Thus, as opposed to restructuring, the entrepreneur is unable to influence or choose who will be selected as administrator to resolve the assets. The actual declaration of bankruptcy has
even greater legal consequences, intended to limit further reduction or devaluation of the assets before the assets can be sold-off by the bankruptcy administrator and the proceeds dis-
tributed among the entrepreneur’s creditors. These consequences include, in particular, the fact that authorisation to dispose with the assets and to act on behalf of the entrepreneur is passed in its entirety to the administrator and all payables which had not become due up to the declaration of bankruptcy and all the entre- preneur’s liabilities incurred before the declara- tion of bankruptcy are automatically deemed due. Likewise, all judicial and other proceed- ings concerning the entrepreneur’s assets are suspended from the moment bankruptcy is declared and all the entrepreneur’s unilateral orders, authorisations and powers of attorney are automatically extinguished. Upon declaration of bankruptcy, creditors
must register their claims against the entrepre- neur in bankruptcy by filling out the prescribed forms and submitting them to the administra- tor and the court within the registration period of 45 days from declaration of bankruptcy. No claim incurred before the declaration of bank- ruptcy can be satisfied without it being regis- tered. It is important to note that according to article 40(1) and (2) of Council Regulation (EC) No 1346/2000 on insolvency proceed- ings, the administrator must individually noti- fy creditors in other member states of the bank- ruptcy and, as such, it is the practice of Slovak bankruptcy courts not to apply the 45-day period to creditors domiciled in other member states. The latest legislative changes also toned down the severity of that time period even for Slovak creditors who, if they submit their regis- trations after the time period, still have the right to be satisfied from the bankruptcy pro- ceeds but cannot exercise voting rights in the bankruptcy proceedings. Once the time period for registering claims
has passed they are verified by the administra- tor, who is supposed to reject disputable claims and exclude them from being satisfied in bank-
ruptcy; if the affected, excluded creditor is still interested in participating in the bankruptcy, it must file action against the administrator and prove the existence of its claim to the court. After all claims in the bankruptcy have been verified by the administrator and a list of all receivables is drawn up, a creditors’ meeting is held. At the meeting, the creditors, through their votes, can replace the existing bankruptcy administrator and elect their representatives to the creditors’ committee, a special body assert- ing the rights of solely the unsecured creditors. Secured creditors, who are the creditors whose claims against the bankrupt are secured by pledge or lien over the bankrupt’s property, financial collateral agreement or otherwise, are satisfied separately from the assets subject to their secured right without any claims of other creditors to these secured assets. Also, share- holders and other related creditors of the bank- rupt do not have the right to vote at creditors’ meetings or the right to be elected to the cred- itors’ committee and they will be satisfied from the bankruptcy assets remaining only after full satisfaction of other unsecured claims (credi- tors). The administrator converts the assets to cash
in the bankruptcy, acting on behalf of and on the account of the entrepreneur. As a rule, the administrator selects the method of converting assets to cash, but they must abide by the bind- ing instructions of the creditors’ committee, secured creditors and the court. The Act on Bankruptcy allows assets to be converted to cash in the form of calling a public tender pro- cedure, by auction, by selling the assets or by other suitable method at the administrator’s discretion. First and foremost, the selling method is based on the fundamental principles of converting assets to cash – getting maximum proceeds at the lowest cost and in the shortest amount of time.
About the author Daniel Grigel JUDr is a senior lawyer at Futej & Partners law firm. His practice sees him advise and represent domestic and foreign clients on various complex matters related to bankruptcy and restructuring law. Previously he worked as a main state advisor at the Antimonopoly Office of the Slovak Republic where he dealt with antitrust cases and cross- border cooperation. He is a member of the Slovak Bar Association and has been published frequently with a special focus on bankruptcy law.
Contact information
Daniel Grigel Futej & Partners
Radlinského 2, 811 07 Bratislava, Slovakia T: +421/2/5263 3161 F: +421/2/5263 3163 E:
futej@futej.sk W:
www.futej.sk
040
IFLR|RESTRUCTURING & INSOLVENCY
www.iflr.com
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