Insolvency Law at Croatia
In Croatia, insolvency law is governed by the Bankruptcy Act (Zakon o stečaju) and the Pre-Packaged Bankruptcy Act (Zakon o predstečajnom poravnanju), which provides the legal framework for both corporate and personal insolvency. These laws are designed to address the issues surrounding insolvency, including the liquidation of assets, debt restructuring, and the protection of creditors' interests.
Key Features of Croatia’s Insolvency Law:
1. Corporate Insolvency (Bankruptcy and Liquidation)
Bankruptcy is initiated when a company is unable to pay its debts, and its liabilities exceed its assets.
Initiating Bankruptcy: The procedure can be initiated by the company itself, a creditor, or by the court.
Bankruptcy Procedure:
A bankruptcy trustee is appointed to take control of the company’s assets.
The company’s operations are ceased, and assets are liquidated to satisfy debts.
Priority is given to secured creditors, followed by unsecured creditors.
2. Pre-Packaged Bankruptcy (Pre-bankruptcy Settlement)
Introduced to allow distressed companies to restructure and reach a settlement with creditors before formal bankruptcy.
Pre-Packaged Bankruptcy is designed to allow companies to reach a pre-bankruptcy settlement that enables restructuring of the company’s debts and allows the business to continue operating.
A court-appointed mediator facilitates negotiations between the debtor and creditors to come up with a restructuring plan.
If an agreement is reached, it is submitted to the court for approval.
3. Personal Insolvency (Bankruptcy)
Individuals who cannot repay their debts may declare bankruptcy, typically when their debts exceed HRK 20,000.
Personal bankruptcy follows a similar process to corporate insolvency, where assets are liquidated, and creditors are paid according to priority.
4. Rehabilitation and Restructuring
Rehabilitation proceedings are available under the Pre-Packaged Bankruptcy Act, allowing financially distressed companies to reorganize and avoid liquidation.
The company submits a restructuring plan that must be approved by creditors and the court.
5. Creditor Protection
The law provides a clear framework for protecting the rights of creditors, ensuring that they are treated equitably during bankruptcy proceedings.
Creditors are classified into groups (secured creditors, preferred creditors, unsecured creditors), and the law sets out how they should be repaid.
6. Cross-Border Insolvency
Croatia’s insolvency law includes provisions for cross-border insolvency under the framework of the EU Insolvency Regulation (Recast) for companies that operate in multiple EU jurisdictions.
Croatian courts cooperate with courts in other EU countries to resolve cross-border insolvency cases.
7. Insolvency Practitioners
The role of insolvency practitioners (such as bankruptcy trustees and mediators) is crucial in handling corporate and personal insolvency cases.
They are licensed and regulated by the Ministry of Justice.
Key Processes in Corporate Insolvency:
Filing of a Bankruptcy Petition: A company or creditor files a petition with the court.
Opening of Bankruptcy Proceedings: The court examines the financial situation and decides whether bankruptcy proceedings should begin.
Appointment of Trustee: A bankruptcy trustee is appointed to manage the company’s assets.
Liquidation of Assets: The company’s assets are sold off to satisfy outstanding debts.
Discharge of Debts: Once the assets are liquidated, the remaining debts are written off.
Key Processes in Personal Insolvency:
Filing for Bankruptcy: Individuals who are unable to repay debts exceeding HRK 20,000 can file for bankruptcy.
Trustee Appointment: A trustee is appointed to manage the individual's assets.
Debt Repayment: The individual works out a debt repayment plan with creditors, or assets are liquidated.
Debt Relief: If the individual cooperates fully, they may receive partial or full debt relief after the process is complete.
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