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Montenegro

Law and regulation of Covid-19 loan moratoriums in Montenegro

Table of contents
  1.  Description of the legislation
    1.  Is there a moratorium on loans legislation implemented in your jurisdiction?
    2. If no: Are there any ongoing discussions regarding a potential introduction of such measures?
    3.  What is the name of the relevant legislation (the “Relevant Act”)?
    4.  What is the duration of the measures (period of moratorium)?
    5. Does the legislation provide for an extension of the period of moratorium?
    6. Is the moratorium mandatory, or can each borrower opt out should they wish to simply continue payments, or opt in if they want to be protected by the moratorium?
  2. Parties and agreements affected by the Relevant Act
    1. Is the moratorium available for both corporate and consumer loans?
    2. Who are the affected Lenders?
    3.  Does it make a difference whether loans are granted by a foreign entity and governed by foreign law?
  3. Impact on the loan agreements
    1.  Is there a cut-off date with respect to loan agreements to which the Relevant Act will apply (e.g. not applicable to loan agreements entered into after the cut-off date)?
    2.  Does the moratorium apply to principal only, or also to interest and/or fees?
    3. Will the maturity of the loan automatically be extended by the moratorium period?
    4.  Are repayments and interest which have become due and payable under the contract before the Relevant Act has come into force covered by the moratorium?
    5. Will lenders be able to terminate a loan due to an event of default other than non-payment (e.g. breach of financial covenants)?
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1. Description of the legislation

1.1 Is there a moratorium on loans legislation implemented in your jurisdiction?

Yes.

1.2 If no: Are there any ongoing discussions regarding a potential introduction of such measures?

Not applicable.

1.3 What is the name of the relevant legislation (the “Relevant Act”)?

Decision on Temporary Measures for Facilitation of Coronavirus Negative Impact on the Financial System (published in the Official Gazette of Montenegro, Nos. 19/20 and 28/20).

1.4 What is the duration of the measures (period of moratorium)?

Up to 90 days or longer, but no longer than the validity of the Relevant Act which can be abolished only by new regulation.

1.5 Does the legislation provide for an extension of the period of moratorium?

Yes, but no longer than the validity of the Relevant Act which can be abolished only by new regulation.

1.6 Is the moratorium mandatory, or can each borrower opt out should they wish to simply continue payments, or opt in if they want to be protected by the moratorium?

The moratorium must be offered to all borrowers, who decide whether to opt in or out by informing the lender. Borrowers may also opt in at a later stage even if they refused to use the moratorium at the beginning.

2. Parties and agreements affected by the Relevant Act

2.1 Is the moratorium available for both corporate and consumer loans?

Yes.

2.2 Who are the affected Lenders?

Local banks licensed in Montenegro, microcredit financial institutions and leasing companies

2.3 Does it make a difference whether loans are granted by a foreign entity and governed by foreign law?

The Relevant Act is silent with respect to that, and in the absence of any further guidance by the regulator, we assume that it is not intended to be applicable on foreign entities.

3. Impact on the loan agreements

3.1 Is there a cut-off date with respect to loan agreements to which the Relevant Act will apply (e.g. not applicable to loan agreements entered into after the cut-off date)?

The moratorium applies on all existing loans and leasing arrangements irrespective of the existence of payment default. It does not apply to new loans, but the banks may extend the moratorium on these loans as well.

3.2 Does the moratorium apply to principal only, or also to interest and/or fees?

The moratorium applies to all payments under the loan agreement.

3.3 Will the maturity of the loan automatically be extended by the moratorium period?

Yes, the maturity of the loan is automatically extended for the moratorium period.

3.4 Are repayments and interest which have become due and payable under the contract before the Relevant Act has come into force covered by the moratorium?

Yes.

3.5 Will lenders be able to terminate a loan due to an event of default other than non-payment (e.g. breach of financial covenants)?

No.

Authors

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Portrait ofMilica Popović
Milica Popović
Partner
Belgrade
Portrait ofKsenija Boreta
Ksenija Boreta
Senior Lawyer
Belgrade