NEW ACT NO. 111/2022 COLL. ON THE RESOLUTION OF IMMINENT BANKRUPTCY

#73New Act No. 111/2022 Coll. on the resolution of imminent bankruptcy

With effect from July 17th 2022, this law on dealing with imminent bankruptcy supplemented the insolvency regulations effective in the Slovak Republic. This law made several changes to Act No. 7/2005 Z. on bankruptcy and restructuring. The most important changes are as stated below.

Changing the definition of insolvency 

A legal entity is considered insolvent if it failed to meet at least two monetary obligations to more than one creditor within 90 days after the due date. Furthermore, the presumption of insolvency was introduced in § 3 par. 2 of Act No. 111/2022 Coll. about the solution of impending bankruptcy. The presumption of insolvency allows the debtor to meet his due obligations, by proving a sufficient amount of his financial assets or within 60 days, from the date of the debtor's bankruptcy, such assets will be acquired and fulfill his monetary obligations. 

Changing the debtor's obligation to file a bankruptcy petition even in the event of insolvency 

The debtor has such an obligation within 30 days from when he learned or could have learned about his bankruptcy. The term bankruptcy means both the extension and insolvency of the debtor. The statutory body of the legal entity, the liquidator or the debtor's legal representative can also file a bankruptcy petition, if they do not do so, they are obliged to pay the debtor a fine of €12,500.

Prohibition in bankruptcy to fulfill claims to the extent that would be beyond the scope of satisfying creditors 

From the moment when the debtor learns or could learn about the bankruptcy, he has the obligation to fulfill the payable monetary claims to the extent that they would fall to the creditor in the event of the bankruptcy being declared. As mentioned, the debtor has this obligation even before the court learned about the bankruptcy, from the moment the debtor learned or could have learned about his bankruptcy. 

According to the law, there are two exceptions to this obligation, namely when the bankruptcy of the debtor occurred during a public preventive restructuring, and when it concerns the fulfillment of a claim that is absolutely necessary to maintain the operation of the debtor's business against an unrelated person. In these two cases, the debtor is not limited to pay only up to the amount of claims that accrue to the creditor in bankruptcy. 

Changing the definition of impending bankruptcy 

The debtor is in imminent bankruptcy, in the event that he is at risk of insolvency. Impending insolvency means that, taking into account all the circumstances, it can be reasonably assumed that the debtor will be insolvent within 12 calendar months. The debtor is therefore obliged to: 

1. Monitor your financial situation so that you can learn about your impending bankruptcy in time and take measures to avert the impending bankruptcy without undue delay. 
2. Assess whether he is at risk of bankruptcy, especially if he is entered in the list of debtors.

 In the event that the debtor discovers that he is at risk of bankruptcy, he is entitled to initiate preventive proceedings, which was introduced by Act No. 111/2022 Coll. about solving the impending bankruptcy.

New preventive procedures

Preventive proceedings apply only to the debtor, a legal entity that is at risk of bankruptcy. It does not apply to entities excluded from the scope of the bankruptcy and restructuring Act No. 7/2005 Coll. such as entities under public law or legal entities whose obligations are guaranteed or held by the state. 

Two new institutes of preventive action are introduced, namely public preventive restructuring and non-public preventive restructuring. The goal of these institutes of preventive action is to provide the debtor with a quick and effective preventive restructuring already at the initial stage of impending bankruptcy. The proposal for the initiation of preventive proceedings is submitted exclusively by electronic means and through a form. Proceedings in the matter of public preventive restructuring begin with the submission of the debtor's proposal, and proceedings in the matter of non-public preventive restructuring are subject to the consent of the debtor's creditors.