Insolvency law trends in Slovakia

SECTION 1: PROCESSES AND PROCEDURES

1.1 What reorganisation and chapter processes can be found for financially troubled debtors? (How is the method commenced? Is insolvency mandatory? Who controls the method and/or administers the property (e.g. the debtor/present administration, the collectors, the courtroom, a specifically appointed mediator or supervisor)? What’s its function?)

The Slovak legislation offers for two specific processes out there for the debtors in monetary difficulties: chapter and restructuring. Each proceedings are initiated solely upon the petition (proposal) and are dived into 2 phases. Chapter is commenced upon declaration of chapter by the courtroom and is being preceded by so known as chapter continuing (preliminary section) the place property of debtor ascertainment is carried out by trustee (in Slovak Republic: the administrator). However, restructuring is commenced upon its allow by the courtroom and is being preceded by so known as restructuring continuing (preliminary section) the place analysis of all conditions is executed by courtroom.

Ought to the debtor file a petition to chapter declaration, its insolvency is presumed. A creditor is entitled to provoke a chapter continuing solely ought to the debtor is bancrupt, i.e. the debtor is unable to fulfil at the very least two financial obligations to a couple of creditor 30 days after their due date.

Not like within the chapter the place insolvency of the debtor is prerequisite, the method of restructuring could also be carried out even when insolvency of the debtor is impending offered the method is really helpful in a restructuring opinion and the upkeep of at the very least a considerable a part of the operation of the debtor’s enterprise and better diploma of collectors satisfaction relatively than within the chapter could also be fairly anticipated. Nevertheless, a creditor is allowed to provoke the restructuring solely after debtor’s endorsement.

The chapter course of is usually supervised by the our bodies of collectors and the competent courtroom whereas the property of the debtor is run by the trustee appointed by the courtroom. However, throughout the restructuring, the administration of the debtor’s property is entrusted to present administration and management of the method is executed by the trustee via endorsement course of subjected to supervision of the courtroom.

Conversion of all residual property of the debtor and its liquidation to be able to guarantee the best doable satisfaction of the collectors is the principle characteristic of chapter. That’s to say, chapter is basic collective execution (liquidation) of a debtor’s property. In distinction to chapter, the upkeep of at the very least a substantial a part of the operation of the debtor’s enterprise, the enforcement safety of the debtor, the prolongation of maturity of respective components of debtor’s obligations and mainly, the bigger extent of the creditor satisfaction relatively than in chapter, are essential goals of restructuring course of.

1.2 Is a keep on creditor enforcement motion out there? (Are further filings mandatory? What does the keep stop? Are there carve-outs, e.g. for monetary collateral? How is the keep lifted? When does it expire?)

Each already initiated enforcement continuing in direction of property of the debtor is ex lege (by operation of legislation) terminated upon declaration of chapter; due to this fact no further filings are wanted. There aren’t any exceptions relating to aforesaid ban of enforcement.

Nevertheless, inside preliminary section of chapter, i.e. inside chapter continuing, are enforcement actions solely suspended versus chapter the place enforcement continuing are terminated. It will equally apply to restructuring, the place enforcement proceedings are solely suspended and after allow of restructuring terminated. Ought to the chapter shouldn’t be declared or the restructuring shouldn’t be permitted, already initiated enforcement proceedings are being resumed.

A keep on creditor enforcement can’t be lifted and it expires upon termination of chapter or restructuring.

1.3 What are the important thing options of a reorganisation plan and the way is it accepted? (Who proposes the plan? Is there a interval of exclusivity? What are the voting necessities? Are collectors put into lessons?)

Usually, a reorganization plan (in Slovak Republic: the restructuring plan) contains 2 essential sections: the descriptive half and the binding half.

It may be concluded that binding a part of the restructuring plan is essential, because it incorporates specification of all rights and obligations to be constituted, altered or expired with respect to individuals of the restructuring plan (equivalent to prolongation of maturity, partial expiration of the obligations, installments schedule). Nevertheless, proper of the creditor to contest authorized acts curbing creditor’s ascertained receivable shouldn’t be affected.

Within the occasion that restructuring is initiated by a creditor, the trustee attracts up and proposes the restructuring plan. If course of initiated by the debtor, it’s liable for the restructuring plan submission.

No interval of exclusivity shall apply in Slovak legislation atmosphere.

With a purpose to undertake the restructuring plan, sure voting necessities need to be met. A participant within the plan possess one vote for every euro of the ascertained receivable and the voting necessities stipulates whether or not votes per capita or votes counted based on the ascertained receivable are wanted. The adoption of the restructuring plan requires that (1) every group for secured receivables votes for the plan adoption, (2) in every group for unsecured receivables, an absolute majority of voting collectors supported the plan (per capita) and concurrently their votes exceed a majority of votes of the voting collectors (per ascertained receivable), (3) in every group for proprietary rights of shareholders votes of an absolute majority (per ascertained receivable) vote for the plan approval, (4) an absolute majority of votes of current collectors (per ascertained receivable) votes for the plan adoption. The consent of debtor is required provided that the debtor is pure individual and restructuring plan is proposed by the trustee.

The restructuring plan adopted by collectors on the approval assembly is moreover topic to the courtroom’s affirmation having risk to both reject the plan on the grounds stipulated by legislation or verify the plan and full a proper means of the restructuring.

The unregistered receivables subjected to restructuring or denied claims develop into unenforceable upon the courtroom’s affirmation of plan.

1.4 Can a creditor or a category of creditor be “crammed-down”? (Are there any creditor protections?)

Restructuring:

If the voting necessities for the plan adoption should not met, the submitter of the plan could demand substitution of approval inside respective teams (lessons) via choice of the courtroom. Nevertheless, there are few circumstances to be fulfilled to be able to demand aforesaid substitution of approval prescribed by legislation. The substitution of approval of an unsecured receivables group will not be awarded if collectors of the group get hold of success in a interval exceeding 5 years; this won’t apply to so-called subordinated claims. All in all, even when a gaggle (class) of creditor is “crammed-down” or outvoted, the plan could also be confirmed by the courtroom via substitution of its consent.

Additional, 50% of the ascertained claims won’t stop to exist and the remaining half converts to different proprietary proper. The debtor could not distribute revenue between its members till receivables of unsecured collectors should not glad to the extent of fifty% of their ascertained quantity; this won’t apply in relation to subordinated claims. Infringement of the debtor’s responsibility below earlier sentence establishes inefficacy of the plan in direction of affected unsecured teams (lessons).

Chapter:

Unsecured receivables of associated individual, unsecured declare consisting of contractual penalty and receivables linked with the duty of subordination are deemed as subordinated claims and are being glad from proceeds remaining after the total settlement of different unsecured receivables.

1.5 Is there a course of for facilitating the sale of a distressed debtor’s property or enterprise? (Are credit-bidding or stalking horse bids allowed?)

Inside chapter, the trustee normally attracts up a gross sales plan of the debtor’s property. Furthermore, any sale is subjected to authorization of the creditor physique or the courtroom; actual property could also be realized solely by public sale and after knowledgeable opinion on its worth is submitted.

Credit score-bidding or stalking horse bids should not allowed.

Inside framework of chapter, a forfeiture of pledged property and blocking of different affords to purchase property of the debtor should not allowed and the trustee shouldn’t be sure by any contractual pre-emption rights.

1.6 What are the duties of administrators of an organization in monetary issue? (Is particular regard available to the collectors?)

To begin with, the debtor is obliged to stop its insolvency and systematically monitor its monetary state of affairs in addition to the standing of its property and obligations. If the insolvency is impending, the debtor is obliged to take applicable measures to avert it with out undue delay.

The bancrupt debtor is obliged to file petition on a chapter declaration inside 30 days of the day of ascertainment of its heavy indebtedness; in any other case statutory representatives of the debtor are obliged to pay in favour of a chapter mass a sum within the quantity of the debtor’s registered capital, however not exceeding double the minimal quantity of an organization’s registered capital stipulated by legislation.

When assessing heavy indebtedness, so-called going concern worth is taken under consideration and obligations are decreased by subordinated claims.

1.7 What precedence claims are there and is safety out there for post-petition credit score?

Receivables in opposition to property (equivalent to prices of property realisation, remuneration of the trustee, wages of workers, and bills linked with continuing) are precedence claims inside chapter.

Claims arisen throughout restructuring continuing, labour receivables to which entitlement arose in month by which restructuring course of was initiated, remuneration of the trustee and non-monetary receivables are precedence claims inside restructuring, not being affected by results of restructuring continuing. Aforesaid claims are claimable in full extent and never included within the restructuring plan, except collectors grant consent thereto.

The post-petition credit score shouldn’t be affected by the restructuring plan, if offered to the debtor after graduation of the restructuring continuing.

1.8 Is there a unique regime for banks and different monetary establishments?

No completely different regime is being utilized for banks and different monetary establishment, if they’re in place of unsecured creditor.

SECTION 2: INTERNATIONAL/CROSS BORDER ISSUES

2.1 Can chapter or reorganisation proceedings be opened in respect of a overseas debtor? (Is there a selected check to find out jurisdiction?)

EU perspective:

Insolvency continuing, i.e. chapter or restructuring, could also be opened in territory of Slovak Republic below the Council Regulation (EC) No. 1346/2000 on insolvency proceedings (“Regulation”).

If a middle of essential pursuits (“COMI”) of the debtor is located in Slovak Republic, the principle insolvency continuing could also be opened in Slovak Republic and is ruled by Slovak legislation (lex fori concursus). Aforesaid essential insolvency proceedings has extraterritorial results and impacts whole property of the debtor throughout the European Union (“EU”).

The secondary insolvency continuing could also be opened in parallel with essential insolvency continuing offered such continuing is initiated after graduation of the principle continuing and institution of the debtor is located in Slovak Republic. The secondary insolvency continuing is ruled by legal guidelines of Slovak Republic and its results are restricted solely to the property situated in Slovak Republic. This shall not apply to restructuring which can’t be opened because the secondary insolvency continuing.

Worldwide perspective:

With respect to recognition of insolvency continuing with overseas factor (out of EU) is utilized reciprocity precept, except worldwide treaty stipulates in any other case. The competence of the Slovak courtroom is given if the debtor has property within the territory of Slovak Republic regardless its quantity.

Chapter declared by the Slovak courtroom impacts property of the debtor located overseas, if authorized laws of respective State allow it.

2.2 Can recognition and help be given to overseas chapter or reorganisation proceedings? (Is there specific laws governing cross-border insolvency? What key circumstances must be glad?)

EU perspective:

In keeping with the Regulation, all choices of the Member States courtroom in relation to insolvency proceedings are acknowledged in different Member States with none additional formal necessities; due to this fact the trustee is entitled to train all powers and competencies stemming from the legislation of the State of the opening of insolvency continuing in different Member State.

Worldwide perspective:

Overseas chapter shall be acknowledged by the Slovak courtroom upon petition of a overseas trustee offered (1) there’s given reciprocity precept, (2) the overseas trustee proves its appointment, initiation of overseas chapter and authorized curiosity of such recognition; except worldwide treaty stipulates in any other case.

SECTION 3: OTHER MATERIAL CONSIDERATIONS

3.1 What different main stakeholders (e.g. governmental or regulatory establishments) may have a fabric influence on the result of the reorganisation? (Are there particular protections for workers? How are pension liabilities handled?

Tax Workplace and Social Insurance coverage Firm have a selected standing throughout the framework of restructuring as suppliers of state assist. Because of this, they’re thought of collectors not consenting with the plan having risk to substitute their approval (see 1.4).

Safety of workers is ensured via assure insurance coverage, which is obligatory for any employer working in Slovak Republic. If an employer is unable to settle claims of workers because of its insolvency, such claims are glad via assure insurance coverage advantages. Pension liabilities are coated by assure insurance coverage advantages, which could be disbursed for 3 months offered the employment lasted for the 18 months previous the employer’s insolvency.

Furthermore, labour claims of workers arisen after chapter declaration are receivables in opposition to property and have the precedence declare standing being glad previous to unsecured receivables.

SECTION 4: CURRENT TRENDS

4.1 In not more than 200 phrases, define any present chapter and reorganisation tendencies particular to your jurisdiction.

A major modification of insolvency legislation grew to become efficient on 29 April 2015 via Act n. 87/2015 Coll. Aforesaid act strengthens a authorized place and will increase potentialities of satisfaction of unsecured collectors in restructuring in addition to establishes a register of disqualified statutory our bodies because of breach of their statutory duties. The modification prevents a merger, an amalgamation and a split-up of an organization throughout chapter or restructuring, that are methods the debtor and its statutory our bodies could keep away from their liabilities. Furthermore, it tightens up obligations of statutory members of bancrupt corporations or corporations going through impending insolvency as to diversion of insolvency and ban on disadvantage of success substituting firm’s personal sources.