Updated 04. 2010
Entrepreneurs may be able to avoid bankruptcy by anticipating difficulties - if they keep a close eye on the financial situation of their business.
Bankruptcy is the commercial failure of a company. Bankruptcy proceedings are defined in the Act on Bankruptcy and Restructuring of 2006. The objective of the Act is the fair distribution of the limited resources of the debtor between the creditors by selling off the assets of the debtor or by gradually satisfying the creditors of the debtor.
The Act on Bankruptcy and Restructuring preceded the Act on Bankruptcy and Settlement. The objective of the Act was to achieve relative satisfaction of the creditors from the assets of the debtor.
If the debtor files a proposal for a restructuring permit or a bankruptcy petition, it is understood that the company has failed.
The Act on Bankruptcy and Restructuring defines failure as when a business becomes insolvent and cannot pay creditors, namely where:
- a debtor is more than 30 days late in paying what is owed to more than one creditor;
- a business which is obliged to keep accounts as per Act No 431/2002 on accounting, has more than one creditor, and the value of the amount due exceeds its asset value.
Administration of the bankruptcy and restructuring process is carried out by the Ministry of Justice of the Slovak Republic.
A bankruptcy petition may be filed by a debtor, creditor, the liquidator of a debtor, or another legally appointed person. Petitions are submitted to the relevant court.
The court provides the supervision stipulated by the law throughout bankruptcy proceedings, and supervises the activities of receivers.
Coping with bankruptcy
A debtor is in a state of failure if he has a number of creditors and he is unable to discharge his liabilities to them within 30 days. In the event a debtor becoming insolvent, the procedures for the administration or liquidation of the company are as follows:
- withdrawal procedures
Liquidation is generally governed by the Civil Code, which at the same time makes reference to Commercial Code provisions on liquidating companies.
In this approach the assets of the company are liquidated and its liabilities are discharged. The process takes place out of court. The result is the winding-up of a company and its subsequent dissolution through removal from the Commercial Register.
The liquidator may be an individual or a legal entity registered in the Commercial Register.
The liquidator has an obligation to notify in respect of the following :
- Commercial Register
- all known creditors
- the relevant tax administrator
- Trade Licensing Office
Restructuring means that suppliers write off part of their claims, but allow the company to remain in business in the hope it will recover, since they have an interest in this. This process takes place under court supervision, in accordance with the Act on Bankruptcy and Restructuring.
The principles of the restructuring process are similar to those of bankruptcy. A debtor or creditor may file a petition. The debtor may appoint a receiver to assess whether restructuring is possible. The assessment must not be more than 30 days old. If the receiver recommends restructuring, the debtor may apply for a restructuring permit.
The restructuring procedure begins with publication in the Trade Journal.
Only those creditors who have registered their claims on time through a declaration are entitled to make claims during restructuring. The declaration, together with attachments, is submitted in two identical copies to the office of the receiver, and one copy is submitted to the Court. The declaration must be received by both the receiver and the court within 30 days of the restructuring permit being issued.
A list of registered claims is drawn up by the receiver under Court supervision in four copies.
The restructuring procedure ends with the publication of a court resolution on the completion of restructuring in the Trade Journal.
Entrepreneurs having experienced bankruptcy should not lose confidence in their ability to embark on a new business.
Bankruptcy procedure: a step-by-step guide
A bankruptcy petition may be filed by a creditor, debtor or liquidator. Proceedings are held under court supervision. A debtor who is bankrupt must file a bankruptcy petition within 30 days of discovering that he is bankrupt.
A bankruptcy petition may be filed by a debtor, creditor, the liquidator of a debtor or another legally appointed person. If a creditor files a petition, its claim is considered probative if it is certified by the debtor on the document together with the debtor's officially certified signature or a judgment from a court or other body.
The debtor's property is taken over by the receiver (správca konkurznej podstaty) who is selected at random using an electronic system.
The bankruptcy procedure has two phases: the start of bankruptcy proceedings and the declaration of bankruptcy, where the actual proceedings start. If the court determines that the bankruptcy petition satisfies the particulars required under the law, it will decide on starting bankruptcy proceedings within 15 days of receiving the petition.
Bankruptcy is considered officially declared once the bankruptcy order is published in the Trade Journal (Obchodný vestník).
Creditors must submit an application for claims together with supporting documents in duplicate to the receiver's 's office, with one copy also going to the court. The application must be received by both the trustee and the court within 45 days of the bankruptcy declaration.
The receiver prepares a schedule of assets for liquidation.
Proceeds from liquidation of the assets subject to bankruptcy proceedings are allocated to creditors who have registered their liabilities.
The court may halt or suspend bankruptcy proceedings.
A debtor who is a natural person has the right to petition the court after the suspension of bankruptcy proceedings under the conditions laid down by the law for clearing his debts - withdrawal. Applications for a withdrawal permit must be submitted before the suspension of bankruptcy proceedings at the latest. The court will permit the withdrawal of the debtor provided that the debtor has duly fulfilled his obligations during the bankruptcy proceedings.
Permission for withdrawal marks the start of a three-year trial period. During this period the debtor must provide the receiver with a sum of money specified by the court at the end of every trial year . However, the maximum amount is 70 % of his entire net income for the trial year just ended.
The court may suspend bankruptcy proceedings if it discovers that the assets of the bankrupt are insufficient to satisfy the claims against the estate.
If a bankruptcy petition is rejected it is the duty of the debtor to inform employee representatives in writing about the insolvency of the company within five days of its occurrence and also to notify the branch of the Social Insurance Agency within eight days.
Should any company assets remain following completion of the bankruptcy proceedings, they will be liquidated.
If no company assets remain following bankruptcy proceedings, or:
- the bankruptcy is suspended because the bankrupt's assets are insufficient to cover the costs of the proceedings and the fees of the official receiver, or
- a bankruptcy petition is suspended due to a lack of assets, or
- bankruptcy proceedings are halted due to a lack of assets, or
- bankruptcy proceedings are suspended due to a lack of assets,
- the court will remove the company from the Commercial Register on the basis of a legal ruling.