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In the Slovak Republic, there are two types of proceedings for companies in financial difficulties:
Both types of proceedings are governed by the law, which ensures transparency and a significant role for the Slovak court. Therefore, it may occur that a company that has initiated restructuring proceeding becomes insolvent, which subsequently leads to the initiation of bankruptcy proceeding.
Other proceedings that lead to the liquidation of a company, for example:
Bankruptcy and restructuring proceedings are applied in the case of a company’s insolvency and are therefore discussed in detail in the following sections.
There are two tests to determine insolvency (“úpadok”):
a company is deemed insolvent if it is unable to pay at least two monetary obligations to more than one creditor within 90 days after their due date
a company that is required to keep accounts under a special regulation is over-indebted if it has more than one creditor and the value of its obligations exceeds the value of its assets.
If a company isinsolventand/or over-indebted, it is in a state of insolvency under Slovak law. Bankruptcy proceedings shall be initiated by the company (as the debtor) or may be initiated by its creditor.
If a debtor does not have debts or assets worth more than €1,000,000 according to the last five financial statements and if the other legal conditions are met, the court may declare the so-called small bankruptcy. This proceeding is quicker and simpler than regular bankruptcy.
A company (as debtor) shall file a petition for bankruptcy within 30 days of the date on which it became aware, or should have become aware with due diligence, of its insolvency. In addition to the debtor, the obligation to file a petition for bankruptcy on behalf of the debtor also extends to
statutory body as well as the member of the statutory body of the debtor, liquidator of the debtor and the debtor’s legal representative
in the event of breach of the obligation to file a petition for the bankruptcy on time there is a penalty in the amount of EUR 12,500.
The company (as the debtor) is required to submit a list of assets, a list of liabilities, a list of related parties, and the most recent regular individual financial statement, along with any extraordinary individual financial statements prepared after the most recent regular financial statement. If the individual financial statements have been audited, the auditor’s report must also be attached to the petition.
Bankruptcy proceedings may be initiated by the creditor, and the petition shall (i) describe the nature of the debt, which is 90 days overdue and the reasoning by which the creditor believes that the debtor is insolvent and (ii) identify another creditor of the debtor with a claim that is 90 days overdue.
The creditor filing a petition for bankruptcy should attach documents to the petition that prove his claim, for example:
acknowledgment of the debt by the company (as the debtor) with the verified signature of the company (as the debtor),
final and non-appealable decision of a court or another authority,
confirmation of an auditor or of a court expert that the creditor accounts the receivable in accounting in accordance with accounting regulations.
The creditor who files a petition for bankruptcy is not obliged to prove their claim as described above if the creditor can reasonably assume the insolvency of their debtor, or if the debtor’s insolvency is presumed due to the publication of a notice in the Commercial Gazette pursuant to a special regulation. The debtor’s insolvency may reasonably be presumed if the debtor is more than 90 days in arrears with at least two monetary obligations to more than one creditor and the debtor has been requested in writing to pay at least one of those creditors.
In general, if a bankruptcy petition is filed by a debtor or a creditor, the petitioner (whether the debtor or the creditor) must also pay an advance payment of EUR 1,500 to cover the expected remuneration and expenses of the insolvency practitioner; however, there are exceptions to this obligation. The advance payment shall be paid into the court’s bank account. If the court rejects the bankruptcy petition or the petitioner withdraws the petition before the insolvency proceedings are commenced, the advance payment will be refunded.
In the case of restructuring proceedings, the proceedings can be initiated by the company (as the debtor) or by its creditor.
If the company´s (as the debtor) bankruptcy is impending or already is bankrupt, it may authorize an administrator to draw up the Restructuring Opinion in order to ascertain, whether the criteria for the restructuring of the company are met, or not (it does not affect the duty of the company to file a petition in bankruptcy in due time, if conditions for obligatory bankruptcy are met).
One or more creditors may authorize an insolvency practitioner to prepare a restructuring opinion if they agree with the debtor to provide the necessary cooperation.
In both situations, the insolvency practitioner may recommend the restructuring of the debtor if the debtor meets the statutory conditions, which include, for example:
A petition for restructuring must be filed with a competent court. The restructuring petition may be filed by either the company (as the debtor) or the creditor. Along with the petition, the petitioner shall submit the restructuring opinion.
Bankruptcy and restructuring proceedings are formally initiated by a court decision published in the Commercial Gazette. The date of publication of the decision is also the date from which creditors may file their claims against the debtor.
In both cases, there is no fee for submitting an application. Each application will be examined by an insolvency practitioner. If the insolvency practitioner determines that a claim is disputed (regarding its title or enforceability), the insolvency practitioner shall deny the claim to the extent that it is considered disputed. The creditor of a denied claim may contest the decision by filing an action in court.
The purpose of bankruptcy proceeding is the liquidation of the company and the redistribution of its assets. An insolvency practitioner should convert the debtor’s assets into cash in order to satisfy creditors. The proceeds from the sale of assets should be distributed to creditors with claims against the debtor, based on a distribution scheme that must be approved by the competent authority in the bankruptcy proceedings.
Other decisions in bankruptcy proceedings may be, for example:
a rejection of a petition for bankruptcy if it does not contain the elements required by law and the defect has not been removed within the specified time limit,
a dismissal of a bankruptcy proceedings due to lack of assets if it finds that a debtor’s assets are worth less than EUR 6,500.
A restructuring plan is prepared in restructuring proceedings and contains two main sections: a descriptive part and a binding part. The binding part contains the identification of all rights and obligations that the parties to the plan are to incur, change or terminate.
The restructuring plan is approved by a creditor’s committeeand must be confirmed by the court. In certain circumstances, a plan may be submitted to the court for confirmation even if it has not been accepted by the creditor’s committee.
The court may also reject the plan, for example, if:
the plan was not adopted by the approval committee; this does not apply if the court replaced their approval with its own decision.
The assets of the bankrupt debtor constitute the bankruptcy estate and are divided as follows:
general assets
separate estate of secured creditors.
The creditors are then satisfied from the proceeds of the sale of the assets according to the relevant estate.
In general, the receivables are satisfied in the following order:
In a restructuring proceeding, the assets are distributed according to the proposal in the restructuring plan, which is approved by the creditors and subsequently confirmed by the court. The restructuring plan must provide unsecured creditors with satisfaction of their claims at least 20% higher than they would receive in a bankruptcy.
The company, as the debtor, is obliged to file a petition for bankruptcy within 30 days from the date it became (or should have become) aware of its insolvency (over-indebtedness), while maintaining professional care; this obligation also applies to the statutory body or a member of the statutory body of the debtor, the liquidator and the legal representative.
For breaching the duty to file a petition for bankruptcy on time, the law stipulates a fiction that the contractual penalty of EUR 12,500 is agreed upon between the company (as debtor) and the person obligated to file the bankruptcy petition. Any agreement between the company and person responsible for filing a bankruptcy petition in time on its behalf that excludes or limits the right to the contractual penalty is prohibited.
The right to a contractual penalty does not affect the entitlement to claim damages exceeding the contractual penalty
Failure to file a petition for bankruptcy on time may result in the disqualification of a person from performing the functions of a member of the statutory body or supervisory body in a commercial company or cooperative, for a period determined by the court decision, or for three years from the date the decision becomes final. The person will then be registered in the Register of Disqualifications; a public register maintained by the District Court of Žilina.
There are several relevant criminal offenses under the Slovak Criminal Code concerning actions in insolvency status or in relation to bankruptcy or restructuring proceedings, such as:
All third persons are obliged to cooperate under the Act of bankruptcy and restructuring. The cooperation shall be provided promptly and free of charge. If any third person fails to provide collaboration as required by the law, the court may penalize such person by a fine up to EUR 3,300.
Legal regulation:
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