January 27, 2010

New Law on Bankruptcy

On January 24, 2010, the new Law on Bankruptcy, which was adopted on December 12, 2009, (the "New Law"), replaced the old Law on Bankruptcy Proceedings (the "Old Law").

Unlike the Old Law, the New Law defines the bankruptcy as the most favorable collective settlement accomplished by bankruptcy creditors. According to the New Law, the administration of the bankruptcy is with a bankruptcy judge instead of a bankruptcy panel (consisting of three judges) provided under the Old Law, and the bankruptcy judge appoints a bankruptcy administrator.

The New Law also prescribes that a creditors' committee consists of all the creditors, regardless of whether or not they have already reported their respective claim to the bankruptcy court. The New Law gives no threshold amount for the initiation of the bankruptcy proceedings as it used to be the case under the Old Law.

Pursuant to the provisions of the New Law, the bankruptcy debtor may file a request to commence the bankruptcy proceedings together with a prepared reorganization plan.

A great novelty of the New Law is the obligation of authorities, in charge of forced execution, to give notice (at the end of each month) to the competent commercial court informing them of the companies that have stopped making payments from their bank accounts for the period of 1 year. On the basis of the mentioned notice, the competent commercial court shall render ex officio a decision initiating preliminary bankruptcy proceedings against the mentioned bankruptcy debtor and determine the amount of deposit required to initiate the bankruptcy proceedings; the required amount of deposit shall be paid by creditors. The creditors or the bankruptcy debtor may initiate the bankruptcy proceedings within a 60 day period as of the mentioned decision of the court if they pay the amount of the required deposit. Those provisions do not apply to the companies that are under restructuring in accordance with the Law on Privatization ("Official Gazette of the Republic of Serbia" no. 123/2009)*.
 

* The application of these provisions is postponed for 90 days as of the effective date of the Law.