The Slovenia Times

New Insolvency Legislation Helping Indebted Companies


"This is a keystone government measure aimed at reviving growth and preserving jobs," Justice Minister Senko Pličanič told the press after the cabinet session.

The centrepiece of the amendments to the financial operations, insolvency proceedings and compulsory dissolution act is a new instrument of "pre-insolvency procedure".

The procedure, also called "preventive restructuring", will allow large and medium-sized companies that could become insolvent within a year to restructure debt in agreement with creditors and eliminate the causes of impending insolvency.

Small and micro companies are excluded for fear that the procedure might be abused.

Minister Pličanič said the procedure would allow for the preservation of "healthy cores" of companies.

This solution was to be enshrined in an act on systemic deleveraging, but the government decided to put all changes to insolvency provisions into the existing act.

The central bank said that the new legislation significantly improves the set of measures for restructuring of companies and increases the role of creditors.

It will be of key importance to implement these measures in practice, Banka Slovenije said, adding that in the long-run, the government should think about making a comprehensive overhaul of insolvency legislation.

The GZS has also endorsed the new legislation. The solutions are still not ideal, but there is an obvious progress, the chamber said, adding that the new tools will enable more successful and efficient restructuring procedures.

It also pointed to the importance of its implementation. "Effective implementation of this law is perhaps the last chance for financial, ownership and business restructuring of companies," the GZS added.

Aside from the pre-insolvency procedure, the new legislation determines seniority of claims in court-mandated debt restructuring procedures with the introduction of classes of creditors.

Another solution gives creditors greater leverage in determining that creditors holding 20% of financial claims may demand court-mandated debt restructuring.

The creditors' motion will also have precedence over a potential rival restructuring plan put forward by the debtor.

However, the changes scrap the condition that at least 50% of claims have to be paid within four years of debt restructuring.

It will also be possible as part of restructuring to spin off healthy parts of a company into a new entity.

Smaller creditors will enjoy better protection with a provision determining that court-mandated debt restructuring needs to be confirmed by at least half of all creditors, which will prevent bigger creditors from imposing their conditions.

The overall procedure of court-mandated debt restructuring will be simplified by broadening the scope of companies eligible for "simplified procedure".

Until now only micro companies were able to apply for the simplified procedure, now companies classified as small can apply as well.


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