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Last update: 07-05-2007
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Bankruptcy - Slovenia

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TABLE OF CONTENTS

1. What are the different types and aims of insolvency proceedings in Slovenian law? 1.
2. What are the conditions for initiating the different types of insolvency proceedings? 2.
3. What is the role of the various participants in insolvency proceedings? 3.
4. What are the consequences of opening insolvency proceedings? 4.
5. What specific rules are laid down for certain categories of claims? 5.
6. How can legal acts of the debtor be challenged? 6.
7. What are the conditions for lodging and admitting claims? 7.
8. What are the rules relating to compulsory settlement? 8.
9. What are the rules relating to the winding-up proceeding? 9.
10. What are the conditions for the closure of the proceeding? 10.

 

1. What are the different types and aims of insolvency proceedings in Slovenian law?

Definition of insolvency in Slovenian law

Insolvency is defined as a debtor's prolonged inability to pay debts.

Pre-insolvency proceedings under Slovenian law

There are no specific, formal pre-insolvency proceedings under Slovenian law for the cancellation or prevention of insolvency.

Informal proceedings for the reorganisation of companies in Slovenian law

There are no specific proceedings for the reorganisation and restructuring of companies outside the framework of formal insolvency proceedings in Slovenian law.

Formal insolvency proceedings under Slovenian law

Insolvency proceedings, in particular compulsory settlement and bankruptcy procedures, are governed by the Compulsory Settlement, Bankruptcy and Liquidation Act (Zakon o prisilni poravnavi, stečaju in likvidaciji, published in Slovenian Official Gazette No 67/93 et seq.).

2. What are the conditions for initiating the different types of insolvency proceedings?

Material conditions

The material condition for the initiation of compulsory settlement and bankruptcy proceedings is the existence of the grounds for bankruptcy (the insolvency or over-indebtedness of the debtor).

Persons and bodies that play a part in insolvency proceedings

Under Slovenian law insolvency proceedings can only be initiated against a debtor with the status of a commercial company, cooperative or independent entrepreneur; in principle they may also be initiated against institutions, state-owned enterprises and natural persons with the status of independent entrepreneurs.

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Who can file an application to initiate insolvency proceedings?

An application to initiate compulsory settlement proceedings may only be filed by the debtor.

The application to commence bankruptcy proceedings may be filed by creditors, debtors themselves, personally liable shareholders or the labour inspector.

How are insolvency proceedings publicised?

The court must officially post notice of the initiation of insolvency proceedings on the court notice board, publish it in the Slovenian Official Gazette and enter it in the companies register and other official records.

3. What is the role of the various participants in insolvency proceedings?

Jurisdiction and responsibilities of the court

A panel of judges decides on the initiation of insolvency proceedings, how the case is brought to court, the sale of the debtor (where a legal person), the appointment and dismissal of the administrator, approval of the draft arrangements for the main distribution of the bankruptcy estate and issuing the decision on the main distribution, etc.

The appointment and powers of administrators

A compulsory settlement administrator may be appointed in compulsory settlement proceedings. A bankruptcy administrator must be appointed in bankruptcy proceedings. In both cases the administrator is appointed by the panel when the decision on the start of insolvency proceedings is taken.

The main duties of compulsory settlement and bankruptcy administrators consist of verifying the state of the debtor's assets and business activities, verifying the list of creditors and debtors of registered claims, verifying the credibility of registered claims, making objections to unjustified claims, etc. In addition, the bankruptcy administrator exercises the rights of management bodies and ownership rights in accordance with the requirements of the bankruptcy proceedings, conducts the debtor's business and represents the debtor.

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Debtors' obligations

The debtor must file the application for commencing insolvency proceedings in good time, and submit all necessary data and information to the chair of the panel along with all the relevant documents.

Rights of creditors and remedies available to them

COMPULSORY SETTLEMENT PROCEEDINGS

  1. Committee of creditors

    In compulsory settlement proceedings, in order to safeguard creditors' interests the panel appoints a committee of creditors which has the right to inspect the debtor's business and financial situation and to put forward proposals and issue opinions as necessary to protect creditors in the proceedings.

  2. Legal remedies available to individual creditors

    Each creditor has the right to lodge an appeal against the decision to approve or refuse compulsory settlement within eight days of the posting of the decision on the court's notice board. Subject to certain conditions each creditor also has the right to file a motion to stay the proceedings at the latest by the day of the vote on the compulsory settlement.

    Each creditor whose claim has been reduced as a result of the approval of the compulsory settlement may, within six months of the expiry of the deadline for execution of the approved settlement, request that the panel withdraw its approval of the compulsory settlement if it believes that the debtor is capable of fulfilling all its obligations as a result of an improvement in the economic and financial situation. Creditors may also request the annulment of the compulsory settlement by taking action in a civil court within two years of the decision approving the compulsory settlement taking effect if the compulsory settlement was approved by fraudulent means.

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BANKRUPTCY PROCEDURE

  1. Committee of creditors

    In bankruptcy proceedings a committee of creditors is normally always set up in order to protect the interests of creditors, unless the bankruptcy estate is insignificant or if this would lead to a considerable increase in the costs of the proceedings.

MEANS AVAILABLE TO CREDITORS IN BOTH PROCEDURES

Generally speaking, in both insolvency procedures creditors have the right of appeal against decisions of the court other than those relating to the work of the administrator, which are challenged by means of objections or motions.

4. What are the consequences of opening insolvency proceedings?

Formation of the bankruptcy estate

The bankruptcy estate of a debtor who is a natural person includes all the assets that they own at the start or acquire before the end of the proceedings and the assets of any personally liable shareholder other than those needed to meet his/her basic living requirements.

Restriction of the debtor's professional capacity

In compulsory settlement proceedings, the professional capacity of the debtor is restricted in accordance with the provisions of the law.

In bankruptcy proceedings, all powers of the debtor's administration, agents and management bodies are suspended and transferred to the administrator with effect from the start of the proceedings.

Types of claims to be lodged

COMPULSORY SETTLEMENT

In compulsory settlement proceedings creditors generally have to lodge all claims other than the exceptions provided for by law.

BANKRUPTCY PROCEEDINGS

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In bankruptcy proceedings creditors must lodge all claims regardless whether or not they have an established material right in relation to the claim. If the claim is secured by a material right, that must be expressly indicated on lodging the claim.

Provisional measures for the purpose of security, staying the initiation of legal proceedings and prohibiting enforcement proceedings

In bankruptcy proceedings, on a motion from a creditor or, exceptionally, of its own motion, the panel may, as soon as a motion to start bankruptcy proceedings is filed, issue a securing order, i.e. a provisional measure which restricts the right of the debtor's authorised representatives to conduct legal transactions, orders payments from the debtor's accounts to be stopped or imposes the obligation to obtain the prior approval of the panel to validate decisions taken by entities of the debtor in relation to the disposal of the debtor's assets.

Where can a foreign administrator file a motion for the publication or registration of insolvency proceedings in a public register in accordance with Articles 21 and 22 of Council Regulation (EC) No 1364/2000?

Administrators appointed in insolvency proceedings initiated in other EU Member States may file for registration in the Slovenian national companies register at the district court (there are 11 district courts in Slovenia) covering the area where the debtor has its registered address.

Each entry in the companies register is published by the court in the Slovenian Official Gazette of its own motion and at the operator's expense. The address of the Official Gazette is Uradni list Republike Slovenije d.o.o., Slovenska cesta 9, 1001 Ljubljana, Slovenia; http://www.uradni-list.si slovenšcina.

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5. What specific rules are laid down for certain categories of claims?

COMPULSORY SETTLEMENT PROCEEDINGS

  1. Set-off

    From the date on which compulsory settlement proceedings are initiated, all claims of creditors on the debtor which are not lump-sum claims expressed in Slovenian tolars, may be converted ex lege into lump-sum claims in tolars in accordance with the provisions laid down by law. Claims are deemed ex lege to have been set off, if they were set off against the debtor's counterclaims on the date of initiation of the proceedings.

BANKRUPTCY PROCEEDINGS

  1. Set-off of claims

    From the date on which bankruptcy proceedings are initiated, all claims of creditors on the debtor which are not lump-sum claims expressed in Slovenian tolars, may be converted ex lege into lump-sum claims in tolars.

    Claims are deemed ex lege to have been set off, if they were set off against the debtor's counterclaims on the date of initiation of the proceedings. Creditors whose claims are deemed ex lege to be set-off items, must bring this to the administrator's attention or be liable for any damages and costs arising on account of this omission.

  2. Mutual settlement agreements

    On a motion by the debtor, the settlement panel may allow such agreements to be waived if either side has failed to fulfil all its obligations by the day on which settlement proceedings were initiated.

  3. Lease (rental) agreements

    The start of compulsory settlement proceedings does not affect the right to terminate lease (rental) agreements.

    The bankruptcy administrator may cancel a lease agreement on the first day of the month upon 30 days' notice regardless of the legal or contractual periods of notice. The lessee has the right in these circumstances to claim damages as a creditor.

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  4. Reservation of title, retention rights

    The start of bankruptcy or compulsory settlement proceedings does not affect the reservation of title and retention rights.

  5. Right of reclamation

    In bankruptcy proceedings, a seller may prevent the sale of items to a buyer if the full purchase price has yet to be paid and the item was delivered to the buyer from elsewhere before the start of the bankruptcy proceedings and has not yet arrived at the destination or the buyer has not yet taken possession of it.

  6. Preferential claims

    Compulsory settlement and bankruptcy does not affect the claims of creditors regarded by the law as preferential creditors (e.g. salary claims). In bankruptcy proceedings all preferential claims are repaid in the same order as the costs of the bankruptcy proceedings. If the distribution of the estate is insufficient for full repayment of claims, they will be repaid proportionately.

  7. Material rights of third parties

    Compulsory settlement proceedings do not affect the material rights of third parties.

    The initiation of bankruptcy proceedings does not affect the material rights of third persons provided they have been declared in due time. The law defines exceptions to the above rules.

  8. Employment contracts

    Subject to 30 days' notice in the case of approved compulsory settlement proceedings, and 15 days' notice in the case of bankruptcy proceedings, the administrator may cancel the employment contracts of no more than the number of workers stipulated by the programme for the termination of employment on account of financial reorganisation. Prior to terminating the employment contracts of a larger number of employees, the administrator must inform the trade unions in the employer's company and the Employment Office (Zavod Republike Slovenije za zaposlovanje).

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6. How can legal acts of the debtor be challenged?

Conditions applicable to legal challenges

The creditors and the administrator have the right to challenge legal acts of the debtor (only if authorised by the president of the panel in the administrator's case). Complaints or objections are made against the person in whose interest the act challenged was committed.

Challenges may be made against all legal acts (including failure to act) that result in disproportionate or reduced payments to creditors or on account of which individual creditors are put in a more favourable position (preferential treatment of creditors).

The complainant must prove through his/her challenge that the other party, in whose interest the act challenged was committed, was aware or should have been aware of the bad economic/financial situation of the debtor (the subjective element of "voidability"). The law determines the legal presumptions when this condition is deemed to be fulfilled and cases where legal acts cannot be challenged.

Eligible period for acts that are challenged

In bankruptcy proceedings, legal acts may be challenged if they were committed in the year preceding the start of the bankruptcy proceedings on condition that the challenge is brought within six months of publication of the notice of the start of bankruptcy proceedings in the Slovenian Official Gazette or before the deadline for the main distribution, if the distribution deadline has already been settled.

7. What are the conditions for lodging and admitting claims?

COMPULSORY SETTLEMENT PROCEEDINGS

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In compulsory settlement proceedings the lodging of the claim is the procedural condition for the taking of action by the creditor. Claims must be filed with the panel within a period of 30 days of the publication of the notice of the start of the proceedings in the Slovenian Official Gazette. Failure to lodge or lodging too late does not mean that the creditor loses the claim, but they do lose the right to vote.

BANKRUPTCY PROCEEDINGS

In bankruptcy proceedings creditors must file their claims to the bankruptcy panel within two months of publication of the notice of the start of the bankruptcy proceedings in the Slovenian Official Journal. Creditors are not personally notified of the start of proceedings and are only informed thereof via the Official Journal and the court notice board.

Claims that are lodged (and material rights) are deemed established if the administrator recognises them as such and the fact is not disputed by any of the creditors present at the end of the test period for claims. The bankruptcy panel instructs creditors whose claims are disputed that proceedings for establishing the existence of a disputed claim in the civil courts will begin within 15 days of the issuing of the instruction.

8. What are the rules relating to compulsory settlement?

Bankruptcy proceedings are conducted in order to sell the bankruptcy estate and repay the creditors. The debtor's assets included in the bankruptcy estate are normally put up for sale at public auction unless the bankruptcy panel orders a different type of sale in accordance with a prior opinion of the committee of creditors.

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Before repayment of the creditors starts, the amount required to pay the costs of the bankruptcy proceedings is deducted from the bankruptcy estate. Creditors are repaid in the following order: first, creditors with a material right to the assets sold, next preferential creditors, and finally the remaining creditors. Claims are settled in the order stipulated by law.

The decision on the main distribution is submitted to the administrator and posted on the court notice board. On the basis of the final decision on the main distribution, the administrator pays the creditors within 15 days of the decision coming into effect. Later distributions take place when the debtor's resources become available.

9. What are the rules relating to the winding-up proceeding?

Bankruptcy proceedings are conducted in order to sell the bankruptcy estate and repay the creditors. The debtor's assets included in the bankruptcy estate are normally put up for sale at public auction unless the bankruptcy panel orders a different type of sale in accordance with a prior opinion of the committee of creditors.

Before repayment of the creditors starts, the amount required to pay the costs of the bankruptcy proceedings is deducted from the bankruptcy estate. Creditors are repaid in the following order: first, creditors with a material right to the assets sold, next preferential creditors, and finally the remaining creditors. Claims are settled in the order stipulated by law.

The decision on the main distribution is submitted to the administrator and posted on the court notice board. On the basis of the final decision on the main distribution, the administrator pays the creditors within 15 days of the decision coming into effect. Later distributions take place when the debtor's resources come available.

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10. What are the conditions for the closure of the proceeding?

Procedure and effect of the termination of proceedings

COMPULSORY SETTLEMENT

The panel endorses the compulsory settlement provided it is voted for by creditors representing more than 60% of all claims by creditors with voting rights. Failing that, the panel orders the compulsory settlement proceedings to be closed. The legal effect of the confirmation of compulsory settlement is a reduction in the amount of the debtor's financial obligation or deferral of the deadline for settlement of the debtor's financial obligations.

BANKRUPTCY PROCEEDINGS

When all the formalities of the bankruptcy proceedings have been fulfilled, the administrator prepares a report and proposes the closure of the proceedings to the bankruptcy panel. The bankruptcy panel publishes the decision on the closure of the proceedings in the Slovenian Official Gazette.

The final decision on the completion or termination of the bankruptcy proceedings is also entered in the companies register. By this act the debtor ceases to be a legal person.

Does the insolvency procedure put a black mark against the debtor's name? Can a debtor start up a new business activity?

Under the provisions of the Companies Act (Zakon o gospodarskih družbah) in relation to company managers, nobody may be appointed a member of the management or supervisory board of a company if, while they were acting as the head of a company or a member of the management or supervisory board of a company, bankruptcy proceedings were instituted against them and they were pronounced liable to repay damages to the creditors in accordance with the law.

Penalties in connection with insolvency proceedings

CIVIL PENALTIES

In addition to general liability for damages, the Financial Operations of Companies Act (Zakon o finančnem poslovanju podjetij) also regulates the personal liability of certain individuals (members of the supervisory board, partners, shareholders, founders) which may arise only in connection with insolvency proceedings.

CRIMINAL PENALTIES

Criminal law prescribes penalties for persons who: (i) with the intention of not paying what they are obliged to pay, apparently or actually worsen their own or a third person's financial circumstances, thus causing bankruptcy; (ii) while engaging in economic activities, are aware that they or a third person is insolvent and, by payment of a debt or otherwise, intentionally put a certain creditor in a preferential position; (iii) knowing that they or a third person is insolvent, and with the intention of defrauding creditors, concede a false claim, draft a false contract or by other fraudulent means cause a large property loss to creditors.

In addition to the perpetrator of the above crimes, legal persons are also criminally liable for criminal offences which the perpetrator commits in their name, on their behalf or in their favour. The sentences imposed on legal persons for their criminal activities may include fines, the confiscation of property and termination of their legal personality.

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Last update: 07-05-2007

 
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