Slovakia: restructuring insolvent businesses

Restructuring is a relatively new feature of Slovak bankruptcy law but one which is increasingly being used by insolvent businesses as they attempt to stave off liquidation.

The key features are:

• creditors may only recover debts which arise before the restructuring begins
• creditors may only recover debts for which they have filed a valid claim within 30 days after the restructuring is approved by the court
• each debt must be the subject of a separate claim, with all details entered correctly on the prescribed form
• two copies of each claim must be filed with the trustee at his business address, with another copy filed at the court conducting the restructuring procedure
• the trustee will review the validity of each claim filed within the requisite period and either accept or reject it
• any creditor wishing to challenge the trustee’s rejection of their claim can file a petition at the court conducting the restructuring procedure

Any debt for which a claim has not been validly filed is excluded from the restructuring, although, under EU insolvency regulations, a creditor’s claim is still valid as long as it is sent to both the trustee and to the court, includes copies of any supporting documents and indicates the nature of the claim, the amount, the date on which it arose, whether it involves any preference, security or reservation of title and what assets, if any, are covered by a guarantee.

Claims from a creditor whose habitual residence, domicile or registered office is in an EU country other than Slovakia may be filed in that country’s official language but must be headed “Prihláška pohľadávky“ and, where required, a translation into Slovak.

Because restructuring allows receivables to be recovered on a pro rata basis, creditors generally recover more than they would under a bankruptcy procedure. The extent to which their claims will be satisfied is set out by the debtor in a restructuring plan, which details the rights and obligations of participants (the debtor and any creditors who have lodged claims), the time period for payment and the basis on which the debtor can continue to trade.

The restructuring plan is not legally enforceable until it is first approved by a creditor assembly and then confirmed by the court. Once this happens, all debts which are not the subject of valid claims will cease to be enforceable. If this does not happen, the restructuring is abandoned and the court begins bankruptcy proceedings instead.

Restructuring is only successful when the restructuring plan has been fully implemented. Any creditor who does not receive (pro rata) payment as envisaged under the plan can seek to enforce the whole of the original debt for which he filed a valid claim.

Law: Act No. 7/2005 Coll. on Bankruptcy and Restructuring; EU Regulation No. 1346/2000 on insolvency proceedings