Amendments to the Bankruptcy Act entered into force on 31 March 2022 harmonizing it with provisions of the Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) 2017/1132 (Directive on restructuring and insolvency).
Amendments have been made throughout the Bankruptcy Act. Summary of some of the most significant you can find below.
1. Pre-bankruptcy proceedings
1.1. Opening of pre-bankruptcy proceedings and the appointment of the pre-bankruptcy trustee
Now, only the debtor is authorized to file a motion to open pre-bankruptcy proceedings, whereas the previous option of the court to appoint a pre-bankruptcy trustee became obligatory.
1.2. Restructuring plan
Only the debtor is authorised to submit the restructuring plan.
Further amendments concern content of the restructuring plan proposal, deadline for submitting the plan to the court (21 days from the decision on established and disputed claims) and the voting process (creditors are considered to have voted for the plan if they do not submit a voting form by the beginning of the voting hearing).
After the plan is accepted by creditors, it is up to the court to decide whether to approve the plan or not. Amendments exhaustively list cases in which the court is authorized to deny the approval – e.g., if the debtor can pay its debts and there is no threatening insolvency.
1.3. The role of the court, duration and cessation of pre-bankruptcy proceedings
The court is no longer in charge of examining the reported claims, which are considered established unless they are disputed by the debtor, the pre-bankruptcy trustee or a creditor within the deadline, but the court manages the examination hearing.
Instead of the current 300 days, the duration of pre-bankruptcy proceedings has been shortened to 120 days. Exceptionally, this may be extended for additional 180 days (based on the proposal of a creditor, the pre-bankruptcy trustee or the debtor).
1.4. Consequences and conclusion of the pre-bankruptcy proceedings
Provisions relating to claims and rights not affected by pre-bankruptcy proceedings, such as support claims arising from family relations, parenthood, marriage or in-laws, have been redefined.
The court issues a decision on concluding the pre-bankruptcy proceedings immediately after the decision on the confirmation of the restructuring plan becomes final, and the court informs thereof the debtor and the pre-bankruptcy trustee in advance.
2. Bankruptcy proceedings
2.1. Bankruptcy administrator
Amendments reintroduced a list of bankruptcy administrators for the area of each court’s jurisdiction, determined by the ministry in charge of justice. The “List of highly qualified bankruptcy administrators” has also been introduced as well as additional conditions for inclusion therein (qualifications, professional knowledge and achievements to date).
Preconditions for removal from the list of bankruptcy administrators, professional exam, training and advanced training are regulated in more detail, and supervision over the work, behavior and ethical principles that bankruptcy administrators must adhere to are additionally prescribed.
Duties of the bankruptcy administrator have also been changed (primarily with regard to the preliminary work in communication with FINA). In relation to the dismissal of a bankruptcy administrator, the court is now authorized to dismiss a bankruptcy administrator who fails to perform duties successfully or for other important reasons ex officio (or at the suggestion of the board or assembly of creditors).
2.2. Association of bankruptcy administrators
Significant novelty is the possibility of the bankruptcy administrators to establish a company. Namely, the provisions of the Bankruptcy Act regulate exactly who and under what conditions may establish a company of bankruptcy administrators, as well as what types of such companies may be established. Two or more bankruptcy administrators can establish a company with the status of a legal entity, either as a partnership or as a limited liability company. If the company of bankruptcy administrators is established as a limited liability company, it must be established by at least two bankruptcy administrators, while the minimum amount of share capital must be at least HRK 200,000.00.
2.3. Bankruptcy plan
The bankruptcy plan can now be submitted by the debtor together with the proposal for opening of bankruptcy proceedings, and after the opening of bankruptcy proceedings both the bankruptcy administrator and the individual debtor have also the right to submit the bankruptcy plan to the court.
With regard to classification of creditors, creditors with small claims are now given the right to be classified as a special group, aiming at protection of vulnerable groups of creditors such as small suppliers.
In addition, amendments to the Bankruptcy Act have changed the reasons for which the court will reject the bankruptcy plan, which are exhaustively listed in the Bankruptcy Act. Likewise, the rules on required majorities have undergone changes. Creditors will now be considered to have accepted the bankruptcy plan if in each group of creditors the majority of creditors voted in favor of the plan. An additional condition is that the sum of the claims of creditors who voted for the plan exceeds twice the sum of the claims of creditors who voted against the bankruptcy plan.
2.4. Other important changes in the bankruptcy proceedings
If the bankruptcy proceedings are not conducted (a court resolution on opening and closing has been made), the bankruptcy administrator is released from its obligation to submit the annual financial report and additional information to FINA. In addition, the bankruptcy administrator is released from the obligation to file a corporate income tax return with the relevant tax administration.
The resolution on opening and concluding the bankruptcy proceedings will also have to be delivered to the debtor’s employees (to avoid the debtor’s employees not being notified of the termination of employment).
The legislator abended previous obligation for the final hearing to be determined no later than a year and a half after the reporting hearing. In addition, with regard to the continuation of business, the legislator no longer provides for a certain period until which the company may continue to operate.