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Last update: 30-05-2007
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Bankruptcy - Slovakia

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TABLE OF CONTENTS

1. What are the different types and aims of insolvency proceedings? 1.
2. What are the conditions for opening each type of insolvency proceedings? 2.
3. What is the role of the various participants in each type of proceedings? 3.
4. What are the effects of the opening of proceedings? 4.
5. What are the specific rules related to certain categories of claims? 5.
6. What are the rules relating to detrimental acts? 6.
7. What are the conditions for lodging and admitting claims? 7.
8. What are the rules relating to reorganisation proceedings? 8.
9. What are the rules relating to realisation proceedings? 9.
10. What are the conditions for the closure of a proceeding? 10.

 

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

Types and aims of bankruptcy proceedings:

  • Definition of bankruptcy: resolution of a debtor's insolvency by realisation of the debtor's assets and collective satisfaction of creditors' claims.
  • Objective: proportionate satisfaction of creditors' claims.
  • Proceedings aiming at administration or winding-up: bankruptcy, restructuring and debt-clearance proceedings.

2. What are the conditions for opening each type of insolvency proceedings?

Conditions for opening each type of insolvency proceedings:

  • Substantive conditions for declaration of bankruptcy: a creditor may apply for the declaration of bankruptcy if the debtor is more than 30 days late in paying his monetary obligation towards the creditor and it is reasonable to assume that the debtor will become insolvent.
  • Participants in bankruptcy proceedings:
    • Participants in bankruptcy proceedings are the debtor (the bankrupt), the applicant and the creditors who registered their claims in a manner specified by this Act.
    • Until the resolution on the declaration of bankruptcy has been issued, any creditor who proves that he would otherwise be eligible to apply for the declaration of bankruptcy may join the proceedings.
    • Participants in bankruptcy proceedings are also persons whose rights or duties will be the subject of the proceedings.
  • Applications for the declaration of bankruptcy may be lodged by the debtor, a creditor, a liquidator or another person specified in the Act on bankruptcy and restructuring.
  • Publicity requirements:
    • The court issues a resolution on the opening of a bankruptcy proceeding and makes it public without delay in the Obchodný vestník (Business Gazette); the bankruptcy proceeding starts on the day of publication of this resolution in the Obchodný vestník. The court does not publish, in the Obchodný vestník, resolutions rejecting an application for a declaration of bankruptcy.
    • The court publishes the appointment of an administrator in the Obchodný vestník without delay.
    • The administrator publishes notices relating to the auction in the Obchodný vestník.

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

The role of the various participants in each type of proceedings:

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  • The debtor's obligations:
    • The debtor is obliged to prevent insolvency. When threatened with insolvency, the debtor has to adopt, without undue delay, appropriate and adequate measures to avert it.
  • The creditors' obligations:
    • A creditor is liable for any errors in the data indicated in the application.
  • The administrator's obligations:
    • The administrator is obliged to administer the assets with due professional care to ensure that the assets are protected against damage, loss, destruction or other deterioration and to ensure that the administration expenses are incurred only to the extent necessary and after thorough consideration of their expediency and economy. When administering assets subject to bankruptcy, the administrator may not favour any creditor or give preference to his own interests or the interests of others over the common interest of all the creditors.
  • The creditors' rights:
    • These include the rights arising out of their claims (e.g. where a claim against the bankrupt is secured by a security right ("a secured creditor"). The creditor is entitled, in a bankruptcy proceeding, to have the claim satisfied in accordance with its priority ranking).
  • The administrator's powers:
    • During a bankruptcy proceeding, the administrator administers the assets subject to bankruptcy, realises them and uses the proceeds of the realisation to satisfy the claims of the bankrupt's creditors in accordance with this Act; the administrator also exercises other rights and duties in a bankruptcy proceeding.
    • Following the declaration of bankruptcy, the bankrupt's right to dispose of the assets subject to bankruptcy and the authorisation to act for the bankrupt in matters related to these assets passes to the administrator; the administrator acts in the name of and on behalf of the bankrupt.
  • The court's jurisdiction:
    • The court exercises supervision of the entire bankruptcy proceeding, to the extent laid down by law.
    • During a bankruptcy proceeding, the court supervises the action of the administrator.

4. What are the effects of the opening of proceedings?

Effects of the declaration of bankruptcy:

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  • Assets subject to bankruptcy
    • The following assets are subject to bankruptcy:
      1. Assets that belonged to the bankrupt at the time of the declaration of bankruptcy.
      2. Assets acquired by the bankrupt during the bankruptcy proceeding.
      3. Assets securing the bankrupt's obligations.
      4. Other assets where this Act so provides.
    • The assets that are subject to bankruptcy constitute the estate, which is divided into the general estate and individual, separate estates of the secured creditors.

  • Disposal of the bankrupt's assets:
    • Following the declaration of bankruptcy, the bankrupt's right to dispose of the assets subject to bankruptcy and the authorisation to act for the bankrupt in matters related to these assets passes to the administrator; the administrator acts in the name of and on behalf of the bankrupt.
    • Legal acts accomplished by the bankrupt during the bankruptcy proceeding are ineffective vis-à-vis its creditors if they curtail the assets subject to bankruptcy; the validity of these acts is not affected.
    • Claims that are subject to bankruptcy must be paid by debtors to the administrator, during the bankruptcy proceeding. Where, nonetheless, a debtor discharges its obligation to a person other than the administrator, the debtor's obligation is not extinguished unless the discharge is received by the administrator.

  • Judicial and other proceedings
    • Unless the Act on bankruptcy and restructuring provides otherwise, the declaration of bankruptcy suspends all judicial and other proceedings.
    • The declaration of bankruptcy does not suspend tax proceedings, customs proceedings, proceedings concerning the maintenance of minor children or criminal proceedings; however, in criminal proceedings it is not possible to decide on damages; the aforegoing without prejudice to Section 48.
    • No proceedings concerning the enforcement of a decision or execution may be initiated in respect of the assets that are subject to bankruptcy; ongoing proceedings concerning the enforcement of a decision or execution are suspended following a declaration of bankruptcy.

  • Security rights:
    • During a bankruptcy proceeding, no security right may arise on assets that are subject to bankruptcy, except for a lien on future assets if it had been created and registered in the Central Notarial Register of Liens, in the land register or another special register before the bankruptcy was declared; no security right may arise on the proceeds from the realisation of assets, not even as on future assets. 

  • Dissolution of community of marital property:
    • The bankrupt's community of marital property is dissolved with a declaration of bankruptcy. Where the community of marital property is dissolved following a declaration of bankruptcy or where the bankrupt's community of marital property had been dissolved before the declaration of bankruptcy but no settlement has been reached, it is necessary to settle the community property.

5. What are the specific rules related to certain categories of claims?

Specific rules related to certain categories of claims:

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  • A creditor whose claim against the bankrupt had arisen before the bankruptcy was declared is entitled, in the bankruptcy proceeding, to have the claim settled, in accordance with the conditions laid down by this Act, by distribution of the proceeds of the realisation of the assets subject to bankruptcy. This right must be exercised in the bankruptcy proceeding by registering the claim duly and on time; otherwise the claim cannot be satisfied in the bankruptcy proceeding and the related rights are not taken into account; the same applies also to future claims asserted by registration.
  • A creditor whose claim against the bankrupt is secured by a security right ("a secured creditor") is entitled, in the bankruptcy proceeding, to have the claim settled in accordance with its priority ranking the conditions laid down by this Act from the proceeds of the realisation of the assets subject to bankruptcy. This right must be exercised by registering the claim duly and on time; otherwise the claim ceases to exist.
  • In a bankruptcy proceeding, also claims that arise subject to a condition ("conditional claims") may be registered by creditors. However, conditional creditors may assert their rights under conditional claims in a bankruptcy proceeding only if they demonstrate to the administrator that the conditional claims have arisen, unless this Act provides otherwise.
  • Also the bankrupt's guarantors, co-debtors and lien‑holders may register their future claims against the bankrupt as conditional claims; the same applies to persons to whom a claim against the bankrupt will arise following the declaration of bankruptcy when they fulfil an obligation on behalf of the bankrupt. Other persons may register their future claims against the bankrupt where this Act so provides.

6. What are the rules relating to detrimental acts?

Rules applicable to the causing of damage:

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  • Cancellation of bankruptcy proceedings:
    • The court decides to cancel a bankruptcy proceeding owing to lack of assets, also without any motion, if it establishes that the bankrupt's assets are insufficient to satisfy claims against the estate.
    • Where the bankrupt who is a natural person dies during the bankruptcy proceeding, his heirs assume his role in proportion to the assets subject to bankruptcy; where there are no heirs or where they refuse the inheritance, the bankrupt's role is assumed by the State.
  • Termination of bankruptcy proceedings:
    • Where, during a bankruptcy proceeding, the court opens a restructuring proceeding in respect of the same debtor, the ongoing bankruptcy proceeding must be suspended until the restructuring proceeding has been terminated or until restructuring has been authorised; where the court, in a restructuring proceeding, authorises the debtor's restructuring, it should without delay cancel the suspended bankruptcy proceeding by means of a resolution. The same applies if a restructuring proceeding is already ongoing and the court opens a bankruptcy proceeding in respect of the same debtor.
    • If the debtor demonstrates, before the resolution on the declaration of bankruptcy has been issued, that he has paid all claims due to the creditors that are parties to the bankruptcy proceeding, the court should without delay terminate the bankruptcy proceeding by means of a resolution.
    • If, in a bankruptcy proceeding which was initiated on a creditor's motion, the debtor demonstrates his solvency, the court should terminate the proceedings by means of a resolution.
    • If the court, in a bankruptcy proceeding, after having appointed a temporary administrator for the debtor, establishes that the debtor's assets will not even be sufficient to cover the costs of the bankruptcy proceeding, it should terminate the bankruptcy proceeding for lack of assets. Otherwise, the court should declare bankruptcy in respect of the debtor's assets no later than 30 days following the appointment of the temporary administrator.

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

Conditions for the lodging and admitting claims:

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  • Registration of claims:
    • A creditor whose claim against the bankrupt had arisen before the bankruptcy was declared is entitled, in the bankruptcy proceeding, to have the claim settled, in accordance with the conditions laid down by this Act, by distribution of the proceeds of the realisation of the assets subject to bankruptcy. This right must be exercised in the bankruptcy proceeding by registering the claim duly and on time; otherwise the claim cannot be satisfied in the bankruptcy proceeding and the related rights are not taken into account; the same applies to future claims asserted by registration.
    • In a bankruptcy proceeding, also claims that arise subject to a condition ("conditional claims") may be registered by creditors. However, conditional creditors may assert their rights under conditional claims in a bankruptcy proceedings only if they demonstrate to the administrator that the conditional claims have arisen, unless this Act provides otherwise.
    • Also the bankrupt's guarantors, co-debtors and lien‑holders may register their future claims against the bankrupt as conditional claims; the same applies to persons to whom a claim against the bankrupt will arise following the declaration of bankruptcy when they fulfil an obligation on behalf of the bankrupt. Other persons may register their future claims against the bankrupt where this Act so provides.
    • A creditor should lodge the registration, together with the annexes, in two copies with the administrator (to be delivered to his office address) and in one copy with the court. The registration should be delivered to the administrator no later than 45 days from the declaration of bankruptcy. Registrations received after this period or those received within the period only by the administrator or only by the court should be disregarded.
    • The delivery of the registration to the court has the same legal effect as regards the running of the limitation period and the extinction of the right as the exercise of the right in court.
    • A creditor is liable for any errors in the data indicated in the registration. If the administrator rejects the creditor's claim and the court, in a proceeding regarding the rejected claim, decides that the creditor was not entitled to be paid the amount registered or that he was entitled to be paid only less than 75% of the amount registered, the creditor has to pay a fine determined by the court, to be credited to the estate concerned, unless the creditor demonstrates that when registering the claim, he acted with due professional care; the entitlement to be paid the fine is enforced by the administrator. This provision also applies where the court, in the proceeding regarding the rejected claim, decides that creditor was not entitled to the security right registered, that he was entitled to a security right in an order less favourable than the one indicated in the registration, or that he was entitled to satisfaction of a claim from the estate in an order less favourable than the one indicated in the registration.
  • Admitting claims:
    • The administrator continuously records the registered claims and the data indicated in the registration in the list of claims in order to produce the final list of claims no later than 10 days from the end of the period for claim registration.
    • Where the administrator establishes, when examining a registered claim, that the registered claim is questionable in terms of legal grounds, enforceability, priority ranking, amount, security by means of a security right or order of the security right, he is obliged to reject the questionable part of the registered claim.
    • Where the administrator rejects the claim at the initiative of a creditor and the creditor of the rejected claim lodges a motion with the court to determine the claim, the creditor who made the initiative has, in the proceeding on the rejected claim, the status of an accessory intervener besides the administrator; the status of an accessory intervener lapses with the lapse of its status of a party to the bankruptcy proceeding. If the administrator, at the initiative of a secured creditor, incorrectly rejected a secured claim of another secured creditor as regards its security by means of a security right or the order of the security right, the secured creditor who made the initiative is liable to the secured creditor of the rejected claim for the damage incurred as a result of the incorrect rejection of his secured claim.
    • Where the creditor of the rejected claim does not, within the period laid by law, bring an action regarding the rejected claim or withdraws the motion lodged with the court to determine the claim, the rejected part of the claim is, in the bankruptcy proceedings, disregarded.
    • A court's decision on the determination of a rejected claim is effective as against all the parties to the bankruptcy proceeding.
    • Until the period for bringing an action regarding the rejected claim has lapsed or until the court has issued a final decision on the determination of the claim, the administrator may recognise the rejected claim in writing; as a result of such recognition, the rejected claim is deemed to be established to the extent to which it was recognised. If the administrator rejected the claim at the initiative of a creditor, he can recognise it only with the consent of that creditor.
    • The administrator records the admission of a registered claim in the list of claims immediately after the registered claim has been deemed to be admitted or after he has recognised the registered claim.

8. What are the rules relating to reorganisation proceedings?

Rules relating to reorganisation proceedings:

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  • Act No 7/2005 Coll. on bankruptcy and restructuring and on amendments to some acts.
  • Conditions:
    • Where the debtor is threatened with bankruptcy or where the debtor is bankrupt, he may authorise the administrator to produce a restructuring opinion ("opinion") in order to establish whether the requirements for the debtor's restructuring have been met. This is without prejudice to the debtor's obligation to lodge a motion for the declaration of bankruptcy in time.
    • Where one or more creditors agreed with the debtor on the necessary collaboration, they may authorise the administrator to produce the opinion themselves.
    • Only a person registered on the list of administrators may be authorised to produce the opinion.
  • Motion:
    • The motion for the authorisation of restructuring is lodged with the court that has jurisdiction. It may be lodged by the debtor or a creditor.
    • The debtor may lodge a motion for the authorisation of restructuring if he had authorised the administrator to produce a restructuring opinion and if the administrator recommended the restructuring in the opinion which is less than 30 days old.
    • A creditor may lodge a motion for the authorisation of restructuring if he had authorised the administrator to produce a restructuring opinion, if the administrator recommended the restructuring in the opinion which is less than 30 days old and if the debtor has agreed with the lodging of this motion.

9. What are the rules relating to realisation proceedings?

Rules relating to realisation proceedings:

  • Realisation of assets:
    • Realisation means converting all assets subject to bankruptcy into money value in the Slovak currency in order to satisfy the creditors. Realisation also includes securing the bankrupt's cash, receiving performance from the bankrupt's monetary claims and disposal of the bankrupt's enterprise or its part for valuable consideration.
    • Realisation of assets subject to bankruptcy aims at maximising the proceeds in the shortest possible time and at the least possible cost. When realising assets subject to bankruptcy, the administrator should act in a manner chosen with due professional care in order to best fulfil the aim of the realisation, while observing the rules laid down for realisation by this Act.
    • The administrator appointed upon the declaration of bankruptcy should, without delay, realise the assets that are imminently perishable, or likely to be destroyed or suffer other substantial deterioration; no instruction of the competent authority or a judicial decision is required.
    • The administrator keeps clear records of the realisation of assets subject to bankruptcy; separate records should be kept for the general estate and for each individual estate. Following the realisation of an estate inventory item, the administrator should allocate the proceeds to the inventory item that was realised. Where the administrator realises several inventory items at the same time and it is not possible to determine the individual proceeds, he should proportionately divide the total proceeds among the items concerned according to their counter value; this calculation is based on the value indicated in the inventory.
    • The administrator should deposit the proceeds of the realisation of the assets subject to bankruptcy in a bank account; the interest paid by the bank in respect of the balance in the account should be considered to be proceeds of the realisation of assets subject to bankruptcy.
  • Methods of realisation of assets:
    • In order to realise the assets, the administrator may:
      1. publish a public tender;
      2. entrust an auctioneer with the sale of the assets;
      3. entrust a securities trader with the sale of the assets;
      4. organise an auction, competitive bidding or any other competitive procedure aiming at the sale of the assets;
      5. sell the assets using any other appropriate method.
  • Distribution of proceeds:
    • A secured claim of a secured creditor should be satisfied, to the extent established, from the proceeds of the realisation of the assets constituting the separate, individual estate of the secured creditor that remained after the claims against the estate linked to the inventory items of the assets constituting the separate estate had been deducted. Where a secured claim of a secured creditor cannot be satisfied in full, the remaining part should be satisfied as an unsecured claim.
    • Unsecured claims should be satisfied, to the extent established, from the proceeds of the realisation of the assets constituting the general estate that remained after the claims against the estate linked to the inventory items of the assets constituting the general estate had been deducted. Where unsecured claims cannot be satisfied in full, they should be satisfied proportionately.
    • Claims linked to an obligation of subordination pursuant to a specific legal provision ("subordinated claims") should be satisfied, to the extent established, from the proceeds of the realisation of assets constituting the general estate that remained in the general estate after other unsecured claims had been satisfied in full. Where subordinated claims cannot be satisfied in full, they should be satisfied proportionately.

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

Conditions for the closure of a proceeding:

  • Closure of the bankruptcy proceeding:
    • The court decides to cancel a bankruptcy proceeding owing to lack of assets, also without any motion, if it establishes that the bankrupt's assets are insufficient to satisfy claims against the estate; in its resolution, the court should decide on the remuneration and the costs of the administrator to be paid from the debtor's assets, on the advance of the remuneration and the costs of the temporary administrator or on the advance of the payment of the costs of the bankruptcy proceedings.
    • The court decides, on the administrator's motion, on the cancellation of the bankruptcy proceeding after the final distribution of the proceeds has been made.
    • On the date of cancellation of the bankruptcy proceeding, the administrator should close the books of account and draws up a separate financial statement pursuant to specific legal provisions. The administrator should also hand over to the bankrupt or, if appropriate, to the liquidator, all required documents and the remaining assets, and ensure that any further action related to the cancellation of the bankruptcy proceeding be taken. Once the action has been taken, the court should dismiss the administrator from his office.
    • Where the bankrupt who is a natural person dies during the bankruptcy proceeding, his heirs assume his role in proportion to the assets subject to bankruptcy; where there are no heirs or where they refuse the inheritance, the bankrupt's role is assumed by the State.

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Last update: 30-05-2007

 
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