As at 23 February 2018

By Mgr. Slavomír M. Čauder
advokát • partner at GIESE, Bratislava

Proceedings Elements of the Directive already included into the national legislation
Restructuring (“reštrukturalizácia”)
Main features:
Restructuring proceedings are aimed at debtor’s recovery enabling the debtor to continue its business.
The debtor's liabilities are restructured based on a restructuring plan, which has to be approved by the creditors as well as the court.
Preventive restructuring procedure as a legal concept introduced by the Proposal for Directive has not been adopted in the Slovak law. There is no formal preventive system available to debtors in financial distress when there is a likelihood of insolvency.
The bankruptcy and restructuring procedures under Slovak Bankruptcy and Restructuring Act only become applicable in case the debtor is already insolvent.
On the other hand, lot of ideas deriving from the Proposal for Directive for preventive restructuring procedure has found their place in the Slovak restructuring procedure including, but not limited to the following rules:
- Debtor remains entitled to dispose of its assets, but some of his legal acts are subject to the trustee’s supervision (Art.5);
- Enforcement procedures are suspended after the beginning of the restructuring procedure (Art. 6);
- A restructuring plan consists of a descriptive part (justification of classes of participants in restructuring plan and criteria for the classes, justification of methods of restructuring procedure) and a binding part (determination of rights and obligations of the restructuring plan participants, which arise, change or expire based upon the restructuring plan) (Art. 8);
- A restructuring plan is prepared by the debtor or trustee and approved by the creditors’ committee (Art. 9);
- A restructuring plan must be confirmed by the court (Art. 10);
- If the restructuring plan has not been approved by each class of creditors, the lacking approval may be substituted by a court's resolution (Art. 11);
- A restructuring plan is binding for all its participants, including those who have not voted in favour of its adoption (Art. 14);
- It is possible to appeal against the court's decision, by which a restructuring plan was rejected (Art. 15);
The content of Art. 16, 17 and 18 has not been adopted in the Slovak legislation.
Company In Distress
(“spoločnosť v kríze”)
Apart from the above we would like to mention a new concept of a Company In Distress introduced in the Commercial Code in 2016.
A company is in distress if it is bankrupt or if a bankruptcy is impending. The impending bankruptcy is a situation in which the assets to liabilities ratio are less than 8:100.
A company in distress is subject to special rules. To name a few:
- Any loan or any similar funding granted to a company in distress by any of its related persons may, under certain circumstances, constitute a funding replacing the company equity. As long as the company is in distress, the repayment of such capital injection is not allowed. The funds repaid in breach of the above provision must be refunded to the company. It is to be noted that the executives of the company in distress are jointly and severally liable for fulfilment of such obligation.
- If a related person provides security for an obligation of a company in distress, the creditor may seek fulfilment of the secured claim from the security provider directly (without the need to seek the performance from the company in distress first).
- Moreover, any performance/benefit granted by a company to its (existing or former) shareholder or a person related to any of them without an appropriate consideration will now be considered to constitute a repayment of a capital contribution. As the repayment of the capital contribution to the shareholders is now prohibited, this new concept means that any performance granted without an appropriate consideration constitutes a breach of such prohibition and as such is to be reimbursed to the company as an unjust enrichment. The claim for such reimbursement cannot be waived by the company and the executives of the company are obliged to collect the debt.