Slovak Republic Once the entrepreneur’s assets have been convert-
ed to cash and satisfaction of the creditors has been made pursuant to the schedule drawn-up by the administrator and published in the Commercial Bulletin, at the motion of the administrator the court will decide on closing the bankruptcy proceedings, which, pursuant to the Commercial Code, is auto- matic cause for dissolution of the entrepreneur and its being struck from the Commercial Registry. This completes the essence of the bankruptcy as a liquida- tion process which, after converting assets to cash and distributing the proceeds among creditors, results in the legal dissolution of the undertaking.
Restructuring Another option for resolving insolvency of an under- taking is restructuring. Although the number of undertakings seeking to resolve insolvency through restructuring is on the rise, the number of cases where restructuring is used as an alternative to bank- ruptcy is still relatively small in Slovakia. Undertakings frequently address their insolvency at a time when it is too late to revitalise and continue doing business under a restructuring plan. If an entrepreneur wishes to resolve its insolvency
through restructuring, it must choose an administra- tor registered in the database of administrators main- tained by the Slovak Justice Ministry to draw up a restructuring assessment. As opposed to bankruptcy, an entrepreneur can actually pick a particular admin- istrator for the restructuring process. In drawing up the assessment, the administrator ascertains the financial and commercial situation of the undertak- ing, evaluates it, and, if the conditions for restructur- ing are met, will recommend restructuring. An appli- cation to permit restructuring may be submitted to the applicable court only if in their restructuring assessment the administrator has an affirmative opin- ion on the feasibility of restructuring. It is best to select an administrator and have them draw up a restructuring assessment at a time when insolvency is still just a risk, because at this stage there is great fea- sibility of realising the restructuring and it also lets the undertaking (its statutory agent) timely decide how to resolve the impending insolvency and subse- quent bankruptcy – that is, whether to opt for bank- ruptcy or restructuring. Importantly enough, appointing an administrator to draw up a restructur- ing assessment does not relieve the debtor of the obli- gation to file a petition to declare bankruptcy within 30 days of the date it became aware of, or by the exer- cise of professional diligence could have become aware of, the insolvency. The purpose of restructuring is to satisfy the cred-
itors to the greatest extent possible, and (as opposed to bankruptcy) to preserve the debtor’s business
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of cases where restructuring is used as an alternative to bankruptcy is still relatively small
“ ” The number
operations according to a written restructuring plan approved by the court. This plan includes a business plan to revitalise the undertaking and ordinarily includes writing off of a portion of the creditors’ claims and push-back of the due dates. This should enable the undertaking to continue business activi- ties in the hope that the entrepreneur can be finan- cially revitalised and will be able to pay creditors at least in the limited extent approved by the court in the restructuring plan. The application for restructuring can be lodged
by the debtor or even by a creditor, but only with the consent of the entrepreneur (debtor). Similar to bankruptcy, the restructuring proceedings comprise of two phases, the first being a formal declaration of commencement of restructuring proceedings where the court does not yet examine the eligibility of the entrepreneur/debtor to subsequently permit restruc- turing; the court rules on this 30 days from com- mencement of the restructuring proceedings. Once restructuring proceedings commence the
debtor may only carry out everyday legal acts in its business and other activities, just as is the case in the commencement of bankruptcy proceedings. The commencement of restructuring proceedings, which is published in the Commercial Bulletin, can also be a warning signal to business partners of the debtor’s economic problems; the Act on Bankruptcy therefore limits the opportunity for contractual partners to uni- laterally terminate contracts concluded with the entrepreneur (debtor) before the commencement of restructuring proceedings. Furthermore, a creditor’s claim registered in the restructuring proceedings can- not be set off by the creditor against the debtor, as that would essentially be deemed individual satisfaction of a creditor’s claims and that is not possible in these proceedings. As with bankruptcy, the entrepreneur is given complete immunity from enforcement actions. The other principles of the restructuring proceed-
ings concerning registration of claims, requirements of the registration and creditors’ bodies are similar to those of bankruptcy. In the subsequent phase of restructuring, the entrepreneur (debtor) must draft a restructuring plan which is subject to a two-phase approval process – first by the creditors’ committee and then by an approval meeting of the creditors – while the court gives final approval. If the plan fails to be approved at the approval meeting, under certain conditions it is possible to seek the court to supersede the negative votes of those creditors who did not approve the plan. The restructuring plan becomes legally effective only when approved by the court. The court’s failure to approve the restructuring plan is cause for automatic declaration of bankruptcy over the entrepreneur’s assets. A rational and coherent plan is, therefore, key to successful restructuring.
IFLR|RESTRUCTURING & INSOLVENCY 041
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