THE WORLD BANK CENTRAL EUROPE AND BALTIC STATES REGIONAL INSOLVENCY WORKSHOP (BRATISLAVA, 2000) REPUBLIC OF MACEDONIA

Transcription

1 THE WORLD BANK CENTRAL EUROPE AND BALTIC STATES REGIONAL INSOLVENCY WORKSHOP (BRATISLAVA, 2000) REPUBLIC OF MACEDONIA BRIEF REVIEW AND COMMENTARY OF THE BANKRUPTCY LAW IN THE REPUBLIC OF MACEDONIA By Maja Malahova 1

2 BRIEF REVIEW AND COMMENTARY OF THE BANKRUPTCY LAW IN THE REPUBLIC OF MACEDONIA Until 1998, it was the Law on Enforcement, Bankruptcy and Liquidation that was the piece of legislation regulating issues related to bankruptcy in the Republic of Macedonia. As from May 6, 1998, the Bankruptcy Law came into effect. The latter emerged as a result of the structural changes in the country - the introduction of market economy, implementation of the Law on Transformation of Enterprises With Social Capital, and the Corporate Law. The principal goal of the Bankruptcy Law is settlement of claims of creditors against insolvent debtors. Bankruptcy proceedings may be initiated over the property of a debtor, be it a legal entity, an individual, a deceased person, joint property of spouses or business unions. Bankruptcy proceedings may not be implemented over property owned by the Republic of Macedonia or a public legal entity. Bankruptcy proceedings may only be initiated in the case of a debtor's inability to meet liabilities (non-liquidity) or a debtor burdened with debts or in a case of an inevitably approaching non-liquidity. Bodies involved in bankruptcy proceedings include the Bankruptcy Council (composed of three professional Judges, of which one a Chairperson, one a Bankruptcy Judge, and the third most frequently a Judge involved in business disputes), a trustee in bankruptcy (an individual with a university degree and at least five years of working record, registered as a sole trader exclusively for this activity. The Chairperson of the Principal Court defines the list of trustees in bankruptcy), Board of Creditors (the Board of Creditors is consisted of creditors with the largest claims, creditors with the smallest claim, representative of employees and secured creditors) and an Assembly of Creditors (consisted of all creditors of the company in bankruptcy). Bankruptcy proceedings are initiated at the request of the creditor or the debtor an is funded by the proposing party. The Law stipulates a previous procedure to examine the conditions for initiation of bankruptcy proceedings. The previous procedure my also include a trustee in bankruptcy. However, in case the proposal for bankruptcy is submitted by the debtor itself, the proceedings are open without delay. 2

3 As on the date of the decision on opening bankruptcy proceedings, the following legal consequences come into effect: - the trustee in bankruptcy takes over the debtor's right to manage and dispose with the bankruptcy estate. - the creditors declare their claims and may collect against those claims only by means of bankruptcy proceedings. - inability to request form the debtor security for the claims or enforcement by means of sale of portions of the property included in the bankruptcy estate. - obligation of the debtor to provide all information to the court or the trustee in bankruptcy; in case of a refusal to do so, the debtor may be forcibly summoned to court or taken into custody as a security measure. - as well as other legal consequences. Following the hearing at which the bankruptcy proceedings are initiated, another hearing follows at which creditors' claims are examined (claims of creditors who declared their claims with the trustee in bankruptcy). Once claims have been examined, a reporting hearing takes place attended by al creditors (Assembly of Creditors). At this hearing, the trustee in bankruptcy submits a report on the financial situation of the debtor, as well as any proposals for rehabilitation of the debtor. This is a significant hearing at which the creditors reach a decision on whether the debtor is to be liquidated (i.e. whether the entire bankruptcy estate of the debtor is to be sold) or the trustee in bankruptcy is to be ordered to prepare a bankruptcy plan (i.e. to prepare a plan of how the debtor is to be rehabilitated, that is how the debtor will settle liabilities towards the creditors and continue operating). In case a decision is reached in favor of liquidation, employment contracts of all employees of the debtor will be terminated and a public auction is initiated to dispose of the debtor's property. Creditors' claims are settled out of the funds raised, with priority given to creditors of the bankruptcy assets. It is, therefore, worthwhile to mention that there are creditors of the bankruptcy assets (parties that have obtained the status of creditors after the initiation of bankruptcy proceedings; this, therefore, includes the costs of proceedings, reward for the trustee, wages and social contributions for the employees they are entitled to for the period between the initiation of proceedings and termination of their employment contracts) and bankruptcy creditors (creditors with claims against the debtor incurred prior to the date of initiation of the proceedings; this also includes secured creditors, i.e. creditors with mortgage as security) and unsecured creditors (creditors demanding their property in the possession of the debtor). 3

4 Based on the above, the first creditors to be satisfied are pre-proceedings, to be followed by creditors of the bankruptcy assets in proportion to the recognized claims. After settlement of claims is completed, the proceeding IS DECLARED CLOSED. In case the Assembly of Creditors decides at this hearing to have the trustee or the debtor prepare a bankruptcy plan, the following takes place: - A time period is determined for the preparation of the bankruptcy plan; this Law, by the way, leaves room for a broad base for rehabilitation. - In parallel, a social plan is prepared (a plan which determines which employees are to continue working and which are to be let go in accordance with the bankruptcy plan). on. - A date for a hearing is set, at which the proposed bankruptcy plan will be voted For a bankruptcy plan to be approved, consent is required from the majority of creditors with a voting right, as well as an approval by the Bankruptcy Council. Once the decision approving the bankruptcy plan comes into effect, the proceeding IS DECLARED CLOSED on the basis of a resolution. The law empowers the trustee to retain the right to supervision and control over the implementation of the bankruptcy plan even after the proceedings are closed. In cases of debtors with no property, the Law also contains a possibility of simultaneously initiating and CLOSING a bankruptcy proceeding. There are also possibilities to halt a bankruptcy proceeding in the following cases: - should the party proposing bankruptcy proceedings withdraw the proposal, - should taking over of debts be approved, - should it be determined by the end of the proceedings that the bankruptcy estate is not sufficient to cover the expenses, - at the request of the debtor, should the debtor determine that the company under proceedings will not fall into situations of insolvency after the proceedings are halted, - at the request of the debtor, provided that, after expiration of the period for declaration of claims, the debtor presents verified written consents with halting the proceedings of all creditors who have declared claims. 4

5 The Law also leaves a possibility of a personal management (a possibility given by the court to the debtor of managing and running property that is a part of the bankruptcy estate and under control of a trustee, but under circumstances of an already initiated proceedings), as well as exemption from all remaining obligations of indebted sole traders. The bankruptcy Law defines the following as special cases of bankruptcy proceedings: 1. Special cases of bankruptcy proceedings of individual debtors with a status of traders. - bankruptcy proceedings over property of deceased traders. - bankruptcy proceedings over joint property of souses. 2. Bankruptcy proceedings with foreign elements. AUTHOR Maja Malahova Justice 5