For a company that is insolvent the following insolvency proceedings are available in Slovenia:
- compulsory settlement proceeding
- simplified compulsory settlement proceeding
- bankruptcy proceeding.
Prior to insolvency there are two options of restructuring proceedings: a court-sponsored financial restructuring and an out-of-court financial restructuring.
Compulsory settlement (postopek prisilne poravnave)
- a compulsory settlement proceeding is a proceeding available to already insolvent companies; it can be proposed even if the bankruptcy proceeding has already been initiated. Once bankruptcy proceeding starts, there are no longer any restructuring options
- the proceeding is usually proposed by a debtor, though in certain cases it may be proposed by creditors holding more than 20% of the value of all claims against the debtor
- compulsory settlement generally affects all unsecured claims. The company, however, has the possibility to propose:
- restructuring of secured claims as well
- restructuring of claims of financial creditors only
- the proceeding is led by an insolvency administrator, appointed by a court, who also oversees the business operations of the debtor during the proceeding
- a proposal for a compulsory settlement proceeding must be substantiated with a combination of one or more of the restructuring measures necessary for a successful restructuring; these measures may include:
- financial restructuring measures: principal haircut, maturity extension, and/or interest rate reduction
- corporate restructuring measures (usually ancillary in nature): a simplified capital reduction, a capital injection with cash inflow or by way of a D/E swap, a downstream spin-off
- operational restructuring measures: divesting non-core assets, operational turnaround, etc.
- compulsory settlement requires a vote of 60% of all affected claims.
Simplified compulsory settlement (poenostavljena prisilna poravnava)
- a simplified compulsory settlement is intended for micro-sized companies and self-entrepreneurs who meet the criteria of micro- or small-sized companies. Some rules of compulsory settlement are simplified to ensure efficient restructuring of small entities. For example, in this proceeding, no administrator is appointed, creditors do not register their claims, there is no creditors’ committee and there is only limited involvement of the court
- simplified compulsory settlement requires more than a 50% vote of all creditors.
Bankruptcy (stečajni postopek)
- a bankruptcy proceeding is initiated to enable a court-sponsored dissolution of an insolvent debtor with the best possible recovery terms for the creditors. After the opening of a bankruptcy proceeding, creditors’ claims can only be exercised within this proceeding. There is no possibility of the restructuring of a debtor within a bankruptcy proceeding.
Court-sponsored financial restructuring (postopek preventivnega prestrukturiranja)
- a court-sponsored financial restructuring proceeding is available to debtors who are not insolvent but are likely to become insolvent within 1 year. If financial creditors holding at least 30% of the value of all financial claims support the initiation of the proceeding this condition is presumed to be fulfilled
- a statutory stand-still/execution holiday prevails for the entire class of financial creditors during the time period of the proceeding
- the proceeding is led by the debtor
- the proceeding is intended for the restructuring of financial claims (secured and unsecured) only; claims of other creditors (e.g. suppliers) are not affected unless they expressly consent to be part of the restructuring agreement
- the restructuring agreement may contain various restructuring measures, but only the following will achieve the “cram-down” effect on dissenting creditors:
- principal haircut and/or maturity extension of unsecured financial claims
- interest rate reduction and/or maturity extension of secured financial claims (to a maximum of 5 years)
- other restructuring measures (e.g. D/E swap, principal reduction of secured claims, maturity extension of secured claims beyond 5 years, haircut and/or maturity extension of claims held by other non-financial creditors) require explicit the consent of affected creditors
- the restructuring agreement must be approved by financial creditors holding at least 75% of the value of all financial claims (with a separate majority of 75% of all secured financial creditors if the restructuring agreement affects secured financial claims).
Out-of-court financial restructuring
- an out-of-court financial restructuring agreement is purely a result of negotiations and agreement between the parties. All parties need to consent to the terms of restructuring agreement.
Under French law, two different amicable restructuring proceedings allow a company which is facing existing or foreseeable difficulties (legal, economic or financial) to seek a voluntary arrangement with its main creditors. These contractual and confidential proceedings aim at facilitating the conclusion of an agreement, allowing the difficulties to be solved outside a formal insolvency proceeding with the help of an officer appointed by the President of the Court (mandataire ad hoc or conciliateur):
- a mandat ad hoc can be opened when a debtor is not in cessation of payments
- a conciliation can be opened before the debtor reaches a state of cessation of payments, or no more than 45 days thereafter. At the end of the negotiations, the agreement can either be approved (constaté) by the President of the commercial court or homologated (homologué) by the Commercial Court. During these proceedings, the company operates normally and can be subject to enforcement measures from its creditors.
Both these proceedings are confidential.
In contrast to amicable restructuring proceedings, the opening judgement of an insolvency proceeding entails the freezing of claims arising before said judgement and the stay of corresponding recovery actions and proceedings against the debtor.
The three insolvency proceedings provided for by French law are as follows:
This is opened by the court when the applying debtor is facing difficulties that it is unable to overcome on its own, but it is not already in cessation of payments. It allows the debtor to keep performing its activity and to pay its debts through the implementation of an instalment plan.
Judicial reorganisation (redressement judiciaire)
This is opened by the Court when the applying debtor is in a state of cessation of payments. It allows the debtor to keep performing its activity and to pay its debts through the implementation of an instalment plan or the sale of its assets and activities to a third party (i.e. disposal plan).
Winding up (liquidation judiciaire)
This is opened by the Court when the applying debtor is in a state of cessation of payments and turnaround is impossible. It usually implies the immediate closure of the business and the sale of assets for the satisfaction of its creditors. However, the Court might authorise the continuation of the activity for a short period of time in order to sell the activities and/or the assets under the best conditions possible.