Lansky

On 17 July 2022, the Act on the Resolving of Imminent Insolvency will enter into force in Slovakia. This Act introduces a new instru- ment to help entrepreneurs and legal persons to resolve their im- pending bankruptcy through public preventive restructuring. 

In a business environment under se- vere strain as a result of the war in Ukraine, rising energy prices and high inflation, Slovak companies will in fu- ture be obliged to take appropriate and reasonable measures to prevent economic bankruptcies in the event of imminent in- solvency. 

The new legislation combines both ele- ments of temporary protection for entrepre- neurs in financial difficulties (in response to the pandemic) and protective instru- ments of general insolvency law. At the same time, the new obligations of statutory bodies are emphasised. They should con- tinuously assess the economic situation of their companies and their economic health and thus prevent bankruptcy or the threat of it. If insolvency is already imminent, they are obliged to take appropriate and propor- tionate measures to avert it without undue delay. 

Public preventive restructuring is an ap- plication procedure initiated by an entre- preneur-debtor in imminent insolvency. In order for the court to authorise a preven- tive public restructuring, it is necessary to fulfil the statutory conditions, in particular that the company is presumed to be viable, that there are no grounds for its dissolution, that it is not in liquidation, has not been de- clared bankrupt and is neither subject to the effects of restructuring proceedings. 

The court, after authorising a preventive public restructuring, shall grant temporary protection to the debtor under the condi- tions laid down by law if ... 

• a majority of the creditors, calculated according to the amount of their out- standing claims, have consented to the granting of such protection, or 
• at least 20 % of all creditors, calculated according to the amount of their unallo- cated claims, have consented and, in the concept plan, the partial remission of the claim or the recognition of its partial unenforceability does not exceed 20 % of any creditor’s claim and the deferral of repayment of any claim does not exceed one year. 

The effects of temporary protection are e.g. bankruptcy immunity, enforcement immunity or the impossibility to enforce a security right against the debtor. The court grants temporary protection to the debtor for three months and may extend it for a further three months at the debtor’s request. At the same time, the court, by the decision to authorise preventive restructuring, ap- points a trustee to the debtor on the basis of a random selection from the list of insol- vency practitioners. During the preventive restructuring process, the trustee mainly performs control tasks and, on the basis of a qualified complaint, examines the debtor’s actions or the liability of its statutory body. During the public preventive restructuring, the court supervises the activities of the trustee and the debtor’s business activities. 

The public preventive restructuring pro- cess divides creditors into affected credi- tors and unaffected creditors. An affected creditor is any creditor whose claim arose before the decisive date and any shareholder if the public plan provides for the sale, transfer or issue of new shares in the debtor, a merger, amalgamation, division or change in the legal form of the debtor, or a change in the memorandum, articles of as- sociation or other similar documents of the debtor. An unaffected creditor is any per- son with an employment claim against the debtor, a petty creditor, a small creditor of up to EUR 5.000, a trustee, a consultant, a non-monetary creditor, a disputed unrelat- ed creditor, a tax authority and a customs authority. 

The court shall appoint a creditors’ commit- tee for the debtor without undue delay after the authorisation of the preventive public re- structuring. The creditors’ committee shall have three or five members. At least three of the members of the creditors’ committee must be unrelated. The competence of the creditors’ committee includes, in particular, determining the actions of the debtor which are subject to the approval of the creditors’ committee and approving those actions, de- termining the actions of the debtor which are subject to the approval of the appointed consultant, granting the debtor’s consent to the acceptance of the crisis financing, or ex- pressing an opinion on the so called public plan as the basic document dealing, in par- ticular, with the degree of satisfaction of the individual creditors. 

The debtor must draw up a public plan in such a way that it ensures a fair distribution of the value of the debtor’s assets among the affected creditors, is realistic, sustain- able and contains all the information nec- essary for the affected creditors to vote on it. The public plan shall create a separate group of affected creditors for each secured creditor, unsecured creditors, creditors of related claims, subordinated creditors and shareholders. The creditors in each group shall be treated equally, taking into account the rule of proportionate satisfaction of creditors. The trustee shall then assess the correctness of the drawing up of the pub- lic plan and shall inform all participants at the approval meeting of the results of that assessment. 

The public plan will be approved by the creditors concerned if ... 

• each group of secured creditors has voted in favour of the public plan, 
• in each group of unsecured creditors, at least a three-fourths majority of the voting creditors in that group, counted according to the amount of claims, have voted in favour of the public plan, 
• in each group of unsecured creditors,
  a majority of the creditors with claims exceeding 1 % of the amount of claims of the voting creditors in that group, counted on the basis of the one vote per creditor rule, have voted in favour of the adoption of the public plan, 
• in each group of related and subordi- nated creditors, a supermajority of the voting creditors in that group, calculated on the basis of the amount of claims, voted in favour of the public plan, 
• in each group of shareholders, a su- permajority of the shareholders voted in favour of the adoption of the public plan. 

After approval, the debtor files a motion to confirm the public plan with the court. If any group does not approve the public plan, the debtor has the option of seek- ing to substitute the court’s decision for the group’s approval in that motion. A court-confirmed public plan is binding on the debtor and each affected creditor. The effects of the public plan shall take effect upon confirmation. 

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