Why the Adoption of the Law on Bankruptcy Remains Pending for a Year?
Even though the working group for drafting the Law on Bankruptcy finalized its work on developing a regulation that should improve one of the most complicated and expensive legal procedures in Serbia back in October last year, a year has passed without it being adopted in the parliament. The reason is not even known to individual members of the working group, despite all authors agreeing on the text.
According to NALED, it was not until the end of July that the draft was sent to the ministries for an opinion, so that in the middle of August it would enter the parliamentary procedure, but after two months, it is yet to be included on the daily agenda. Thus, the resolution of the fate of 2.079 companies undergoing bankruptcy procedure, whose average duration reached incredible four years and five months (even a third lasts between five and eight years) is further postponed. Finding a solution is also necessary because of the 50,000 employees of companies filing for bankruptcy and privatization, who do not receive their salaries.
"The joint group for the improvement of Serbia's position on the Doing Business List, formed by the Serbian government and NALED, received assurances that the draft would be adopted before May, when the World Bank made a reform overview, but that did not happen. For now, it remains unclear when this procedure will improve, and it is certain that this will not help Serbia to advance on the next Doing Business List that is coming out in October," - says Dubravka Kosić, Director of Law Office Kosić, a member of NALED.
According to the World Bank, Serbia ranked a high 47th among 189 countries in this category. However, the big problem is the high costs of implementing the procedure and a significant reduction in the amount of money that the creditors manage to collect in the name of claims they had against the company in bankruptcy.
The World Bank has estimated that creditors spend up to 20% of the funds owed by the company in bankruptcy on court fees and other fees in the proceeding. In developed countries, this cost is only 9.1%, or twice as low. Furthermore, at the end of the procedure, the creditors in Serbia manage to collect 32.5% of claims, while this percentage is about 73% in developed countries.
The key novelties in the Draft Amendments to the Law on Bankruptcy are aimed at improving the efficiency and transparency of the procedure, with a great shift expected from the introduction of the possibility of leasing a bankruptcy debtor as a legal entity, thus providing an opportunity to continue the business operations and preserve its assets.
The legislator’s aim is to increase the involvement of creditors with secured claims. They will be given the opportunity to get involved in the work of the creditors' committee, which was not possible so far, and in specifically determined circumstances, they will also have an opportunity and a deadline to collect the receivables. Also, when it comes to the process of asset liquidation, an obligation is introduced to evaluate the efficiency of a particular method of liquidation and the insolvency administrators would have a deadline to offer each of the parts of the property for sale.