Insolvency Law at Montenegro
Montenegro's insolvency framework is primarily governed by the Law on Bankruptcy (Zakon o stečaju), which provides mechanisms for both corporate and personal insolvency. The law aims to facilitate the restructuring of financially distressed entities and, when necessary, their orderly liquidation. (The International Comparative Legal Guide To Recovery & Insolvency 2012 - Montenegro - Insolvency/Bankruptcy - Insolvency/Bankruptcy/Re-Structuring - Montenegro)
⚖️ Key Features of Montenegro’s Insolvency Law
1. Grounds for Initiating Insolvency Proceedings
Insolvency proceedings can be initiated on the following bases:
Permanent Insolvency: The debtor is unable to meet its financial obligations within 45 days of their due date or has suspended all payments for more than 30 consecutive days.
Over-Indebtedness: The value of the debtor's liabilities exceeds the value of its assets. (Insolvency / Restructuring In Montenegro - Insolvency/Bankruptcy - Montenegro)
Insolvency proceedings may be initiated by the debtor, a creditor, or the company's liquidator before the Commercial Court in Podgorica. (Insolvency / Restructuring In Montenegro - Insolvency/Bankruptcy - Insolvency/Bankruptcy/Re-Structuring - Montenegro)
2. Insolvency Procedures
Montenegro offers two primary insolvency procedures:
Bankruptcy (Liquidation): This procedure involves the sale of the debtor's assets, settlement of creditors' claims from the bankruptcy estate, and termination of the debtor's legal existence.
Reorganization: This procedure allows for the continuation of the debtor's business operations under a court-approved reorganization plan, aiming to rehabilitate the debtor and satisfy creditors' claims more favorably than in liquidation. (Insolvency / Restructuring In Montenegro - Insolvency/Bankruptcy - Insolvency/Bankruptcy/Re-Structuring - Montenegro)
A reorganization plan can be submitted by the debtor, the insolvency receiver, creditors holding at least 30% of the aggregate amount of secured claims, creditors holding at least 30% of the aggregate amount of unsecured claims, or persons owning at least 30% of the debtor's share capital. (Insolvency / Restructuring In Montenegro - Insolvency/Bankruptcy - Insolvency/Bankruptcy/Re-Structuring - Montenegro)
3. Creditor Payment Priority
Insolvency creditors are classified into the following payment priority rankings:
Unpaid gross salaries of the debtor's employees up to the amount of the annual minimum wage in the two years prior to the insolvency proceeding opening, and employee claims for work-related injuries.
All public income claims (i.e., taxes and other liabilities owed to the state) due in the last three months prior to the insolvency proceeding opening, except for contributions for pension and disability insurance.
Other creditors' claims. (Insolvency / Restructuring In Montenegro - Insolvency/Bankruptcy - Montenegro, Insolvency / Restructuring In Montenegro - Insolvency/Bankruptcy - Insolvency/Bankruptcy/Re-Structuring - Montenegro)
Costs and expenses of the insolvency proceedings and the obligations of the insolvency estate are ranked senior to all creditors' claims. (Insolvency / Restructuring In Montenegro - Insolvency/Bankruptcy - Montenegro)
4. Personal Bankruptcy
Introduced in August 2015, the Personal Bankruptcy Act applies to individuals (consumers) who are insolvent. The law includes a mandatory 60-day out-of-court negotiation period, followed by an in-court settlement phase. If a settlement is not reached, formal bankruptcy proceedings are initiated. The bankruptcy administrator is responsible for the sale of the debtor’s assets and distribution of proceeds to creditors. After the liquidation of assets, the court may discharge the remaining debt, subject to certain conditions. (Montenegro: Personal Bankruptcy Act | BDK Advokati)
5. International Recognition of Insolvency Proceedings
Montenegro recognizes foreign insolvency proceedings based on the principle of reciprocity. The competent court may refuse to take any action in relation to international insolvency proceedings if such action is contrary to the legal system of Montenegro. (2015 Insolvency and Corporate Reorganisation Report: Montenegro | IFLR)
🏛️ Legal Framework
Law on Bankruptcy (Zakon o stečaju): Governs insolvency and bankruptcy proceedings for legal entities.
Personal Bankruptcy Act: Regulates insolvency proceedings for individuals.
Law on Enforcement Procedure: Provides provisions related to the enforcement of claims and assets.
📌 Practical Considerations
Timely Action: Debtors are encouraged to initiate insolvency proceedings early to explore restructuring options.
Professional Guidance: Engaging legal and financial advisors is crucial to navigate the complexities of insolvency proceedings.
Court Involvement: The Commercial Court in Podgorica plays a central role in overseeing and approving insolvency and bankruptcy procedures. (Montenegro in: IMF Staff Country Reports Volume 2016 Issue 200 (2016))
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