Slovak insolvency law recognises the following processes available to debtors (legal entities) in financial difficulties:
- insolvency (bankruptcy) proceeding pursuant to Part 2 of the Slovak Insolvency Act (konkurz), as a process leading to the liquidation of the insolvent debtor
- formal restructuring (reštrukturalizácia), which enables the debtor’s business to continue.
The insolvency proceeding has two initial phases: commencement of bankruptcy and declaration of bankruptcy.
Commencement of bankruptcy
If the insolvency petition meets the formal criteria, the competent court decides within 15 days from the commencement of bankruptcy having various effects such as:
- the debtor is obliged to limit its activities to the ordinary course of business
- the security enforcement or enforcement proceedings cannot generally commence or continue
- company liquidation is interrupted, as well as any merger/demerger processes.
If there is doubt about the sufficiency of the debtor’s assets, the competent court may appoint a preliminary insolvency administrator to find out if the debtor has sufficient assets to cover the insolvency costs. Within this phase, the debtor may pay mature obligations or initiate a restructuring proceeding, resulting in the interruption or termination of the insolvency proceeding.
Declaration of bankruptcy
If the conditions are met (i.e. the debtor is still insolvent and has sufficient assets), the court declares insolvency over the debtor and the formal insolvency proceeding starts: the insolvency administrator is appointed and takes charge of the debtor’s assets, and creditors are asked to register their claims. Further actions in the insolvency proceeding subsequently aim at selling the debtor’s assets and the collective satisfaction of creditors’ claims.
Restructuring opinion and petition
A restructuring opinion prepared by an insolvency administrator foregoes the formal restructuring proceeding. This can be initiated by the debtor or a creditor; however, the creditor may do so only if the debtor cooperates and agrees thereto. If the administrator recommends restructuring, the debtor or creditor (depending on who asked for the restructuring opinion) can file a restructuring petition.
The restructuring proceeding also has two initial phases: commencement of reorganisation proceeding and approval of reorganisation.
Commencement of reorganisation proceeding
The commencement of reorganisation proceeding has similar effects as the commencement of bankruptcy (e.g. the debtor is obliged to limit its activities to the ordinary course of business). In addition, the other contractual party may not terminate or withdraw from the contract due to the default or restructuring of the debtor: such actions or contractual provisions are ineffective.
Approval of reorganisation
If the conditions are met, the court approves the restructuring and the formal restructuring proceeding starts: the restructuring administrator is appointed, and creditors are asked to register their claims. In contrast to the insolvency proceeding, the debtor remains in charge of its assets, but its legal acts are subject to approval by the restructuring administrator in the extent stipulated by the court. Following the general meeting of all creditors and the creditors’ committee, the restructuring trustee prepares the restructuring plan to be subsequently approved by the creditors’ committee, the general meeting of all creditors and the court.
Most court decisions (in particular the ones approving various phases) are published in the Commercial Journal (available here: https://www.justice.gov.sk/PortalApp/ObchodnyVestnik/Formular/FormulareZverejnene.aspx) as well as in the Insolvency Register (available here: https://ru.justice.sk/ru-verejnost-web/pages/searchKonanie.xhtml?query=).