Vol 3 (2006) - Issue 5

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Reorganisation of the Bankruptcy Debtor in the Serbian Legal System

Reorganisation of the bankruptcy debtor is an important novelty in the Serbian legal system since it was introduced with the enactment of the Law on Bankruptcy Proceedings on 23 July 2004 (Official Gazette of the Republic of Serbia, No. 84/2004 and 85/2005) (‘the Law’). The aim of the reorganisation is the settlement of the bankruptcy creditors, recovery of the bankruptcy debtor, restoration of the governing rights of the debtor’s management and cancellation of the minimum number of labour agreements.
During the reorganisation, the debtor’s business activities are performed as in any other regular situation. The debtor functions while the bankruptcy administrator performs its duties.
The basic presumption for submitting a reorganisation plan is that the debtor is unable to pay its debts. The bankruptcy debtor is considered to be unable to pay its debts if:
1. it cannot respond to its obligations within 45 days from the date they became due;
2. it has stopped all payments for a continuous 30 day period; or
3. the debtor shows that it is probable that it will be unable to pay its existing obligations when they become due.
Reorganisation plan
The reorganisation is implemented according to the reorganisation plan, which is given in writing. The reorganisation plan may be submitted at the same time as a petition for commencement of bankruptcy proceedings, provided that other requirements of the Law are met.
Submission of the reorganisation plan
The reorganisation plan may be submitted by the bankruptcy
debtor, bankruptcy administrator, creditors holding at least 30% of the secured claims, creditors holding at least 30% of the unsecured claims, as well as persons owning at least 30% of the debtor’s ownership interest. The debtor or the bankruptcy administrator will most likely submit the plan.
There is the possibility in practice that the petition for commencement of bankruptcy proceedings and the reorganisation plan are submitted simultaneously, especially
if the authorised person is a bankruptcy debtor or the person owning at least 30% of the debtor’s ownership interest.
Nevertheless, a reorganisation may be rejected if, at the initial creditors’ hearing, creditors who hold 70% or more of the claims vote for bankruptcy of the debtor. In such case, the bankruptcy council issues a decision to commence the procedure of sale of the assets of the bankruptcy debtor.