Finance Minister Brigita Schmögnerová's office has finally managed to steer the bankruptcy law through cabinet. photo: TASR |
After several delays for heated discussions at ministries and government committees, the draft of the new law will see a wide range of revisions to approximately 15 laws, including the Commercial Code, Civic Code, Tax and Custom Laws.
The main aim of the new law and its supporting legislation is to give more rights to creditors and allow them to play a major role in determining the future path of a bankrupt company. Under current legislation, owners of financially troubled companies are able to block the attempts of creditors to push their firms to closure and recover at least some of their assets.
The new law will also allow the big state banks such as Slovenská Sporiteľňa (SLSP) and Všeobecná Úverová Banka (VÚB) to clean up their loan portfolios and become more attractive to potential foreign strategic partners. On the verge of bankruptcy, with no hope for future recovery, many Slovak companies had been unable to pay their debts to the likes of SLSP and VÚB. It was then impossible for these banks to write these debts off, a process essential for the financial institutions' restructuring and future sale over the next two years.
With the initial approval by the government and approval from parliament expected in April, company chiefs are hoping to gain a clearer picture of how the new law will affect them in practice rather than just on paper.
Juraj Renčko, an advisor to Finance Minister Brigita Schmögnerová and one of the authors of the bankruptcy draft, said that under current legislation there are five groups of creditors, ranked by importance. The most important are the Social Insurance Company, the Health Insurance Company and the Pension Fund. "Now, with this new law, all the creditors are equal in making decisions on the future of a company as well as in rights to get their receivables paid, and that's why there have been discussions about the Health and Social Insurance companies," he said, explaining that the Health and Labour Ministries had been reluctant to see the firms they administered lose their priority status.
Government experts locked in discussions on the law blamed the delays in its approval on the fact that it was coupled with other fundamental legislation. "This law is in some ways an artificial part of the Slovak legal system, and creates strong friction with other laws, so we had to find a way to embed it into existing legislation, which of course, took time," said Renčko. Changes to the tax and customs laws, he said, proved to be one of the sticking points in the formation of the draft.
Alojz Medar, head of the Legislative Department for Civil Law at the Ministry of Justice, said that the complexity of the bankruptcy law had prevented the Justice Ministry from presenting it as a single package. "Instead, we had to separate certain parts of the package and spread them among [the health, economy, finance, justice and labour] ministries, all of which had something to say about them," he said.
Originally not included in the government's legislative plan until 2001, the urgency of putting the economy and the domestic business sector back on track forced the government's hand on the bankruptcy law. Renčko said that the current bankruptcy law had left too many messy situations between debtors and creditors when companies got into deep financial trouble.
"One should realise that we are changing a bankruptcy law which was approved in the post-war period, more than 50 years ago. And that's why we have to consider the situation we have now. With the current law, one can bring only butchers to bankruptcy [proceedings]," Renčko said.
However, the draft revision of the law, according to Medar, will still need further changes. "The best thing would be to prepare an entirely new law," Medar said. He added that this may take up to two years.
