portion 1: PROCESSES AND PROCEDURES
1.1 What reorganisation and bankruptcy processes are available for financially apprehensive debtors? (How is the process commenced? Is insolvency critical? Who controls the process and/or administers the estate (e.g. the debtor/existing management, the creditors, the court, a specially appointed mediator or supervisor)? What is its purpose? )
The Slovak law provides for 2 particular processes available for the debtors in financial difficulties: bankruptcy and restructuring. Both proceedings are initiated solely upon the petition (proposal) and are dived into 2 phases. Bankruptcy is commenced upon declaration of bankruptcy by the court and is being preceded by so called bankruptcy proceeding (initial phase) where property of debtor ascertainment is carried out by trustee (in Slovak Republic: the administrator) . On the other hand, restructuring is commenced upon its permit by the court and is being preceded by so called restructuring proceeding (initial phase) where evaluation of all prerequisites is executed by court.
Should the debtor file a petition to bankruptcy declaration, its insolvency is presumed. A creditor is entitled to launch a bankruptcy proceeding only should the debtor is insolvent, i.e. the debtor is unable to fulfil at least two monetary obligations to more than one creditor 30 days after their due date.
Unlike in the bankruptcy where insolvency of the debtor is prerequisite, the process of restructuring may be carried out even if insolvency of the debtor is impending provided the process is recommended in a restructuring plan and the maintenance of at least a mountainous portion of the operation of the debtor? s enterprise and higher degree of creditors satisfaction rather than in the bankruptcy may be reasonably expected. However, a creditor is authorized to originate the restructuring only after debtor? s endorsement.
The bankruptcy process is generally supervised by the bodies of creditors and the competent court while the estate of the debtor is administered by the trustee appointed by the court. On the other hand, within the restructuring, the administration of the debtor? s property is entrusted to existing management and control of the process is executed by the trustee through endorsement process subjected to supervision of the court.
Conversion of all residual property of the debtor and its liquidation in order to ensure the highest possible satisfaction of the creditors is the main feature of bankruptcy. That is to say, bankruptcy is general collective execution (liquidation) of a debtor? s property. In incompatibility to bankruptcy, the maintenance of at least a worthy allotment of the operation of the debtor? s enterprise, the enforcement protection of the debtor, the prolongation of maturity of respective parts of debtor? s obligations and chiefly, the larger extent of the creditor satisfaction rather than in bankruptcy, are main aims of restructuring process.
1.2 Is a conclude on creditor enforcement action available? (Are additional filings notable? What does the discontinue prevent? Are there carve-outs, e.g. for financial collateral? How is the pause lifted? When does it expire? )
Each and every already initiated enforcement proceeding towards property of the debtor is ex lege (by operation of law) terminated upon declaration of bankruptcy; therefore no additional filings are needed. There are no exceptions regarding aforesaid ban of enforcement.
However, within initial phase of bankruptcy, i.e. within bankruptcy proceeding, are enforcement actions only suspended as opposed to bankruptcy where enforcement proceeding are terminated. This will equally apply to restructuring, where enforcement proceedings are only suspended and after permit of restructuring terminated. Should the bankruptcy is not declared or the restructuring is not permitted, already initiated enforcement proceedings are being resumed.
A stop on creditor enforcement cannot be lifted and it expires upon termination of bankruptcy or restructuring.
1.3 What are the key features of a reorganisation concept and how is it current? (Who proposes the view? Is there a period of exclusivity? What are the voting requirements? Are creditors set into classes? )
In general, a reorganization conception (in Slovak Republic: the restructuring understanding) includes 2 main sections: the descriptive section and the binding section.
It can be concluded that binding fragment of the restructuring idea is crucial, as it contains specification of all rights and obligations to be constituted, altered or expired with respect to participants of the restructuring opinion (such as prolongation of maturity, partial expiration of the obligations, installments schedule) . However, accurate of the creditor to contest good acts curtailing creditor? s ascertained receivable is not affected.
In the event that restructuring is initiated by a creditor, the trustee draws up and proposes the restructuring belief. If process initiated by the debtor, it is responsible for the restructuring understanding submission.
No period of exclusivity shall apply in Slovak law environment.
In order to adopt the restructuring idea, definite voting requirements have to be met. A participant in the thought hold one vote for each euro of the ascertained receivable and the voting requirements stipulates whether votes per capita or votes counted according to the ascertained receivable are needed. The adoption of the restructuring notion requires that
(1) each group for secured receivables votes for the opinion adoption.
(2) in each group for unsecured receivables, an absolute majority of voting creditors supported the idea (per capita) and concurrently their votes exceed a majority of votes of the voting creditors (per ascertained receivable) .
(3) in each group for proprietary rights of shareholders votes of an absolute majority (per ascertained receivable) vote for the concept approval.
(4) an absolute majority of votes of note creditors (per ascertained receivable) votes for the belief adoption. The consent of debtor is required only if the debtor is natural person and restructuring notion is proposed by the trustee.
The restructuring notion adopted by creditors on the approval meeting is furthermore subject to the court? s confirmation having possibility to either reject the thought on the grounds stipulated by law or confirm the thought and complete a formal process of the restructuring.
The unregistered receivables subjected to restructuring or denied claims become unenforceable upon the court? s confirmation of idea.
1.4 Can a creditor or a class of creditor be “crammed-down”? (Are there any creditor protections? )
If the voting requirements for the understanding adoption are not met, the submitter of the belief may put a question to substitution of approval within respective groups (classes) through decision of the court. However, there are few conditions to be fulfilled in order to ask aforesaid substitution of approval prescribed by law. The substitution of approval of an unsecured receivables group may not be awarded if creditors of the group bag fulfillment in a period exceeding five years; this will not apply to so-called subordinated claims. All in all, even if a group (class) of creditor is “crammed-down” or outvoted, the thought may be confirmed by the court through substitution of its consent.
Further, 50% of the ascertained claims will not pause to exist and the remaining portion converts to other proprietary lawful. The debtor may not distribute profit between its members until receivables of unsecured creditors are not joyful to the extent of 50% of their ascertained amount; this will not apply in relation to subordinated claims. Infringement of the debtor? s duty under previous sentence establishes inefficacy of the opinion towards affected unsecured groups (classes) .
Unsecured receivables of related person, unsecured claim consisting of contractual penalty and receivables connected with the obligation of subordination are deemed as subordinated claims and are being delighted from proceeds remaining after the pudgy settlement of other unsecured receivables.
1.5 Is there a process for facilitating the sale of a distressed debtor? s assets or business? (Are credit-bidding or stalking horse bids allowed? )
Within bankruptcy, the trustee usually draws up a sales notion of the debtor? s property. Moreover, any sale is subjected to authorization of the creditor body or the court; valid estate may be realized only by auction and after expert conception on its value is submitted.
Credit-bidding or stalking horse bids are not allowed.
Within framework of bankruptcy, a forfeiture of pledged property and blocking of other offers to remove property of the debtor are not allowed and the trustee is not scoot by any contractual pre-emption rights.
1.6 What are the duties of directors of a company in financial concern? (Is special regard to be had to the creditors? )
First of all, the debtor is obliged to prevent its insolvency and systematically monitor its financial location as well as the area of its assets and obligations. If the insolvency is impending, the debtor is obliged to pick appropriate measures to avert it without undue delay.
The insolvent debtor is obliged to file petition on a bankruptcy declaration within 30 days of the day of ascertainment of its heavy indebtedness; otherwise statutory representatives of the debtor are obliged to pay in favour of a bankruptcy mass a sum in the amount of the debtor? s registered capital, but not exceeding double the minimum amount of a company? s registered capital stipulated by law.
When assessing heavy indebtedness, so-called going trouble value is taken into myth and obligations are reduced by subordinated claims.
1.7 What priority claims are there and is protection available for post-petition credit?
Receivables against assets (such as costs of property realisation, remuneration of the trustee, wages of employees, and expenses connected with proceeding) are priority claims within bankruptcy.
Claims arisen during restructuring proceeding, labour receivables to which entitlement arose in month in which restructuring process was initiated, remuneration of the trustee and non-monetary receivables are priority claims within restructuring, not being affected by effects of restructuring proceeding. Aforesaid claims are claimable in chubby extent and not included in the restructuring belief, unless creditors grant consent thereto.
The post-petition credit is not affected by the restructuring concept, if provided to the debtor after commencement of the restructuring proceeding.
1.8 Is there a different regime for banks and other financial institutions?
No different regime is being applied for banks and other financial institution, if they are in station of unsecured creditor.
share 2: INTERNATIONAL/CROSS BORDER ISSUES
2.1 Can bankruptcy or reorganisation proceedings be opened in respect of a foreign debtor? (Is there a particular test to settle jurisdiction? )
Insolvency proceeding, i.e. bankruptcy or restructuring, may be opened in territory of Slovak Republic under the Council Regulation (EC) No. 1346/2000 on insolvency proceedings (“Regulation”) .
If a center of main interests (“COMI”) of the debtor is situated in Slovak Republic, the main insolvency proceeding may be opened in Slovak Republic and is governed by Slovak law (lex fori concursus) . Aforesaid main insolvency proceedings has extraterritorial effects and affects entire property of the debtor across the European Union (“EU”) .
The secondary insolvency proceeding may be opened in parallel with main insolvency proceeding provided such proceeding is initiated after commencement of the main proceeding and establishment of the debtor is situated in Slovak Republic. The secondary insolvency proceeding is governed by laws of Slovak Republic and its effects are microscopic only to the assets located in Slovak Republic. This shall not apply to restructuring which cannot be opened as the secondary insolvency proceeding.
With respect to recognition of insolvency proceeding with foreign element (out of EU) is applied reciprocity principle, unless international treaty stipulates otherwise. The competence of the Slovak court is given if the debtor has property in the territory of Slovak Republic regardless its amount.
Bankruptcy declared by the Slovak court affects property of the debtor situated abroad, if right regulations of respective set permit it.
2.2 Can recognition and assistance be given to foreign bankruptcy or reorganisation proceedings? (Is there particular legislation governing cross-border insolvency? What key conditions need to be ecstatic? )
According to the Regulation, all decisions of the Member States court in relation to insolvency proceedings are recognized in other Member States without any further formal requirements; therefore the trustee is entitled to employ all powers and competencies stemming from the law of the area of the opening of insolvency proceeding in other Member area.
Foreign bankruptcy shall be recognized by the Slovak court upon petition of a foreign trustee provided (1) there is given reciprocity principle, (2) the foreign trustee proves its appointment, initiation of foreign bankruptcy and just interest of such recognition; unless international treaty stipulates otherwise.
portion 3: OTHER MATERIAL CONSIDERATIONS
3.1 What other major stakeholders (e.g. governmental or regulatory institutions) could have a material impact on the outcome of the reorganisation? (Are there special protections for employees? How are pension liabilities treated?
Tax Office and Social Insurance Company have a specific space within the framework of restructuring as providers of region wait on. For this reason, they are considered creditors not consenting with the conception having possibility to substitute their approval (survey 1.4) .
Protection of employees is ensured through guarantee insurance, which is mandatory for any employer operating in Slovak Republic. If an employer is unable to determine claims of employees due to its insolvency, such claims are ecstatic through guarantee insurance benefits. Pension liabilities are covered by guarantee insurance benefits, which can be disbursed for three months provided the employment lasted for the 18 months preceding the employer? s insolvency.
Moreover, labour claims of employees arisen after bankruptcy declaration are receivables against assets and have the priority claim plot being tickled prior to unsecured receivables.
piece 4: modern TRENDS
4.1 In no more than 200 words, outline any novel bankruptcy and reorganisation trends specific to your jurisdiction.
A necessary amendment of insolvency law became effective on 29 April 2015 through Act n. 87/2015 Coll. Aforesaid act strengthens a true space and increases possibilities of satisfaction of unsecured creditors in restructuring as well as establishes a register of disqualified statutory bodies due to breach of their statutory duties.
The amendment prevents a merger, an amalgamation and a split-up of a company during bankruptcy or restructuring, which are ways the debtor and its statutory bodies may avoid their liabilities. Moreover, it tightens up obligations of statutory members of insolvent companies or companies facing impending insolvency as to diversion of insolvency and ban on drawback of fulfillment substituting company? s hold resources.