Under a new law, designed to streamline procedures, all companies whose assets have been frozen for more than 120 days will now be declared bankrupt.
|Orsat Miljenic. | Photo by Flickr|
Croatia's new law on bankruptcy came into force on Tuesday, sending 19,646 companies with 10,139 employees into bankruptcy.
The new law proscribes that all companies that have their assets blocked for over 120 days will automatically be pushed into declaring bankruptcy.
These 19,646 companies owe around 2.5 billion euro while 15,001 of the companies, which have no employees, owe 1.9 billion euro to various borrowers.
Croatia's financial agency, FINA, will initiate the bankruptcy procedure within eight days after a company's assets are blocked for more than 120 days. A pre-bankruptcy procedure will be initiated before the courts after assets are blocked for 90 days.
One novelty of the law is that companies that do not pay workers’ wages for 90 days also risk undergoing pre-bankruptcy procedure. The state will also have to pay up to three minimum wages to workers not paid by their employers.
The law also brings in the possibility of pre-bankruptcy procedure being initiated by the borrower in order to evade bankruptcy. Additionally, the law will proscribe the implementation of a bankruptcy plan, which will enable the company to continue working during the bankruptcy procedure.
FINA will first push into bankruptcy companies that have been blocked for over 1,000 days and which have no employees.
Justice Minister Orsat Miljenic on Monday said that Croatia ranks very low when it comes to the efficiency of its bankruptcy procedures.
“Of the 28 members of the EU, Croatia is on 24th place in terms of the duration of bankruptcy proceedings and even lower in collection [of lenders' claims],” Miljenic said.
According to him, the previous bankruptcy procedure was an overcomplex process during which up to 70 per cent of companies’ assets were spent on the costs of the procedure itself.
“It is pointless, as that way everyone loses - workers, creditors and company, because some [companies] that might be able to continue to work, cannot do so,” he added.
He noted that workers have a right to report their companies after one salary is not paid. Miljenic said the overall purpose of the law is to secure the bankruptcy procedure and remove companies that generate major insolvency from the market