Guide to Bankruptcy Proceedings in Serbia

Introduction to Bankruptcy Proceedings

Bankruptcy proceedings in the Republic of Serbia are regulated by the Bankruptcy Law, which defines the conditions, procedures, and consequences of opening bankruptcy over legal entities. This law provides a framework that enables organized and fair creditor recovery, with the possibility of reorganizing companies that have the potential to continue operations.

When Are Bankruptcy Proceedings Initiated?

Bankruptcy proceedings are initiated when the debtor is permanently unable to pay, meaning it cannot settle its due monetary obligations for a period of 45 consecutive days, or when it is over-indebted, meaning its assets do not cover existing obligations. A petition for initiating bankruptcy can be filed by creditors, the debtor itself, or a liquidation administrator.

Phases of Bankruptcy Proceedings

Bankruptcy proceedings consist of several key phases that ensure a systematic and fair process:

Preliminary proceedings: The court examines whether the conditions for initiating bankruptcy are met. In this phase, a temporary bankruptcy administrator is appointed who conducts an initial analysis of the company's condition.
Opening of bankruptcy proceedings: After the court determines that conditions are met, it issues a decision to open bankruptcy proceedings. This decision appoints a bankruptcy administrator, sets the deadline for filing claims, and schedules the first creditors' hearing.
Examination of claims: The bankruptcy administrator examines filed claims and prepares a list of recognized and disputed claims. Creditors have the right to contest other creditors' claims at the examination hearing.
Liquidation of the bankruptcy estate: The bankruptcy administrator proceeds with the sale of the debtor's assets through public auction, bid collection, or direct negotiation, depending on the decision of the creditors' committee.
Creditor recovery: Funds obtained from asset sales are distributed to creditors according to the legally established priority order.
Conclusion of proceedings: After creditor recovery, the court issues a decision to conclude the bankruptcy proceedings and deregister the company.

Reorganization as an Alternative

The Bankruptcy Law provides for the possibility of company reorganization through the adoption of a reorganization plan. This is a particularly important option for companies that have the potential to continue operations but have encountered temporary financial difficulties. A reorganization plan may provide for debt rescheduling, conversion of claims into equity shares, sale of part of the business, and other measures that enable continued operations.

Pre-pack reorganization, introduced through amendments to the Bankruptcy Law, enables the preparation of a reorganization plan before the formal opening of bankruptcy proceedings, significantly accelerating the entire process and reducing costs.

The Role of the Bankruptcy Administrator

The bankruptcy administrator is the central figure in bankruptcy proceedings. They take over the management of the company, represent the debtor, inventory assets, examine claims, and implement the creditor recovery plan. The bankruptcy administrator must be a licensed person with a passed professional examination and appropriate experience.

Creditor Rights

Creditors in bankruptcy proceedings have numerous rights, including the right to file claims, participate in creditors' hearings, vote on the reorganization plan, and the right to be informed about the course of proceedings. A distinction is made between secured and unsecured creditors, with secured creditors having priority in recovery from the value of collateral.

Conclusion

Bankruptcy proceedings in Serbia are a complex legal and economic process that requires expert management and deep understanding of the legal framework. Engaging experienced bankruptcy administrators and expert advisors significantly contributes to the efficiency of proceedings and optimal outcomes for all interested parties.