Management mistakes and liability in serbian insolvency proceedings
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Transcript of Management mistakes and liability in serbian insolvency proceedings
Management Mistakes and Liability in Serbian
Insolvency Proceedings
Branko RadulovicLaw School, University of Belgrade &
Office for Regulatory Reform and Impact Assessments
• CONTESTING DEBTOR’S LEGAL ACTIONS
• CRIMINAL LIABILITY
• OTHER SANCTIONS
• “AUTOMATIC” BANKRUPTCY
• PREPACKS AND OUT-OF-COURT
SETTLEMENT
• DISQUALIFIED DIRECTORS REGISTER
CONTESTING DEBTOR’S LEGAL ACTIONS
• When?– Obstructing equal settlement and favoring specific
creditors• Deadlines
– Contesting may be performed from the day of opening of the bankruptcy proceedings until the day when the hearing on the main distribution of the bankruptcy estate is held.
• Who?– Plaintiff - creditor or bankruptcy administrator– The bankruptcy administrator is obliged to contest legal
actions
CONTESTING DEBTOR’S LEGAL ACTIONS
• Types– Regular Settlement– 6 months
• if the bankruptcy debtor was insolvent at the time of the transaction, and the creditor knew or ought to have known of its insolvency.
– Irregular Settlement – 12 months• providing security or settlement for one
creditor which he was not entitled to request, or was entitled to request but not in the manner and at the time when it was provided
CONTESTING DEBTOR’S LEGAL ACTIONS
• Direct damage to creditors– within 6 months before filing for bankruptcy
• if the bankruptcy debtor was insolvent at the time and • the counterpart knew of its insolvency;• or the debtor’s action or failure to act would result in
the inability of creditor to exercise his rights– transaction was concluded after the filing of the
petition• the counterpart knew of its insolvency
• Intentionally damaging creditors and transactions and actions without or at a negligible compensation– within five years before the filing of the petition
CRIMINAL LIABILITY
• Causing bankruptcy– irrational spending or disposal of funds, excessive
borrowing and taking disproportionate obligations, irresponsible contracting, failure to timely exercise claims, destroying or concealing property or other actions that are inconsistent with the conscientious business bankruptcy and thereby cause other damage
– negligence• Causing “false” bankruptcy
– apparent or actual impairment of companies assets• However, there is no criminal liability for failing
to timely file for bankruptcy
OTHER SANCTIONS
– Prohibition to perform • the duty performed at the time of the
offense or• managerial positions • or all duties related to the disposition,
use, management or handling of the trusted property
PROBLEMS
• In practice, criminal sanctions and civil liability is hardly ever realized– Subjective problems - passive public prosecutors– Objective problems - lack of quantitative standards and
difficulties regarding evidence
• Petitions were filed too late– Debtors - no need to protect from enforcement (weak
enforcement system)– Creditors -not willing to finance the proceedings
• Introduction of Special procedure in case of continuing insolvency
• Blocked accounts – Serbian specificity– due to widespread use of bills of
exchange/ promissory notes
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
0
2000
4000
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10000
12000
1516123 318
1461
8003
340 293 247 271 246 259 294 237 330
4795
471
Bankruptcy tsunami
8003Companies
Bailed out*154
Bankruptcy proceedings opened879
Erased from the business registry
First wave results
PrepacksDozen successful
cases since the new law is in force
decision to initiate preliminaryProceeding(t=3)
Debtor to remove
deficiencies within 8 days
Prolonging up to 15 days due to
complexities of the case
Judge opens bankruptcy, confirms the
adoption of the proposed
prepackaged reorganization
plan, and suspends
bankruptcy simultaneously
Pre-packaged
plan submitted
simultaneously with the petition for bankruptcy
(t=0)
Preliminary proceedings
minimum 30 days
Preliminary proceedings maximum
45 days
reorganization plan is not
adopted at the hearing
Earliest after 30 days
Expected duration
around 50 days
Maximum duration
3+45+15=63 days
the prohibition of enforcement against the
secured andunsecured assets of the bankruptcy debtor(t=5)
Criteria Out-of court restructuring Pre-packaged plan Conventional
reorganization
Involved parties
Voluntary approach
*minimum two commercial banks
All creditors All creditors
Majority voting no yes yes
Moratorium partial Full *not necessarily full
Bankruptcy administrator no Possible
appointment yes
Formalities few many many
Direct costs very low low high
Indirect costs minimal low high
• The government has announced the establishment of the Disqualified Directors Register