Justice Minister Orsat Miljenic has said at a news conference in Zagreb that he expects the new bankruptcy legislation, which goes into force on 1 September, to accelerate bankruptcy proceedings for companies that generate insolvency and to improve the protection of creditors' claims.
Reports from the European Commission and the World Bank show that Croatia is at the bottom of the rankings regarding the efficiency of bankruptcy proceedings, the minister said on Monday. In the 28-strong EU, Croatia ranks 24th according to the length of bankruptcy proceedings and it moves further downward when it comes to the collection of claims, he warned.
Bankruptcy proceedings are often conducted in a way that 70% of the assets of those who go into bankruptcy are used to cover only the proceedings. This is absurd, and everybody is losing: employees, creditors and the society, as some who may have been able to resume their business are prevented by the proceedings, the minister said.
He underscored that the greatest novelty of the new law is the fact that it provides for automatic bankruptcy for companies blocked for 120 days and more. A plan has been elaborated for the sequence of legal entities going into bankruptcy over a year. The first to do this are no-employee companies whose accounts have been frozen for more than 1000 days. The next are companies with employees and they will be covered by this scheme as of June 2016. The minister also announced unified forms for declaring bankruptcy.
Non-payment of wages for more than three months and overindebtedness will also be grounds for launching bankruptcy proceedings, which will be conducted before courts.
The comprehensive new law, which has 446 articles, will replace the existing one that has been in force for 18 and a half years and amended seven times. Its purpose is to ensure a speedier, more effective and transparent conduct of bankruptcy proceedings.
According to the Financial Agency (FINA), of 22,754 legal entities with frozen accounts at the end of June, 19.646 (86.3%) had had their accounts frozen for 120 straight days or longer, their liabilities amounting to 19.2 billion kuna, or 94.2% of all outstanding payments. These companies employed 10,139 workers. Among the legal entities with accounts frozen for more than 120 days, more than a quarter, or 15,001, had no employees and owed 14.4 billion kuna.
(EUR 1 = HRK 7.55)
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