Scholarly record

THE LEGAL FRAMEWORK OF BANKRUPTCY IN THE REPUBLIC OF MACEDONIA AS OF 1991

A. Jashari

Abstract

Insolvency legislation reform in the country began back in 1997 when the new bankruptcy law was enacted and published in the “Official Gazette” in October 1997. It entered into force on 6 November 1997 and came into effect on 5 June 1998. With the enactment of this new law, the former “Law of Forced Settlement, Bankruptcy and Liquidation”, as state regulation, used after the breakup from Yugoslavia, was replaced and never used again. This 1998 law was amended three times: in July 2000, 2002 and 2004, and was strongly under the influence of the German and American bankruptcy laws. Most important amendments introduced are the following: •the role of the creditors was changed from advisors into core decision-makers in thebankruptcy proceedings; •a plan of reorganisation is now required, as an opportunity to extend the business andreorganise the debtor following the commencement of the bankruptcy proceedings; •personal bankruptcy proceedings; and •special bankruptcy proceedings against the property of a sole proprietor. All in all, the new law was rather complex, affecting both, the case law and the role of creditors in bankruptcy proceedings, thus creating a different perception of insolvency in general terms. The reform was then further developed with the enactment of the Law on Bankruptcy in 2006. This law was published in the “Official Gazette” no. 34/2006 on 22 March 2006 and entered into force on the 30 March 2006. In regards to applying to the Bankruptcy Law, Books of Regulations were also published, affecting the programme and the manner of organising the exam for obtaining an authorised trustee certificate, the remuneration of IPs and the reimbursement of the bankruptcy procedure costs. The IPs’ professional standards were also elaborated into details, especially the one concerning the sale of debtor's assets. A Code of Ethics for Trustees was also issued. The implementation of the regulations, the professional standards and the Code of Ethics managed to eventually fully complete the legal framework regulating insolvency in the country. The most important changes consist of: •establishing a Chamber of Trustees, as a professional association of licensed trustees; •elaborating the principle of urgency, by means of introducing time limits for takingprocedural actions leading to bankruptcy procedure, which is now supervised by a bankruptcy judge, in contrast to the former solution that proved rather inefficiency in the absence of a specialised court; •bankruptcy counselling can now be obtained from an Appellate Authority dealing withcomplaints and appeals, and may act against decisions made earlier during the bankruptcy proceedings. The procedure of examining and approving creditors’ claims was also shortened, by granting competence to the Board of Creditors and the Creditors’ Assembly; and •redefining the conditions for the commencement of bankruptcy proceedings and thecreation of conditions for proposing a simpler reorganisation plan, which was further followed by reduction of costs of the proceedings. Soon after the Law was enacted (in December of the same year), the Law on Amendments to the Bankruptcy Law was changed. A group of MPs proposed that the amendment is removed and improved amendments were added, which would restrict the right of the bankruptcy trustee to be appointed to more than three bankruptcy proceedings. The Law Amending the Law on Bankruptcy, passed in July 2007, and entering into force on the eighth day following the publication in the “Official Gazette”, was changed again, thus introducing penal provisions similar to misdemeanour provisions in other laws. The third revision of the Bankruptcy Law, that is, the Law on Amendments to the Bankruptcy Law, published in the “Official Gazette” in April 2011 and entered into force on the eighth day following its publication, changed specific tasks of the bankruptcy trustee, and aimed at accelerating bankruptcy proceedings. Namely, the greatest change introduced in this report is the task of trustees to update all changes and decisions made by the authorities dealing with bankruptcy proceedings in the E-Bankruptcy Register, which is kept in the Central Registry. The Ministry of Economy was expected to prescribe the form and manner of maintaining the insolvency register. That was what happened, and the Rule-book on the form, content and manner of maintaining the E-Bankruptcy Register was issued in November 2011. Thus, conditions and possibility were created for creditors and other stakeholders to monitor the electronically commenced bankruptcy proceedings. As for the fourth update of the Bankruptcy Law, passed in May 2013, it may also be noted that it contains the most important amendments made to the bankruptcy law. The first segment amended the commencement of bankruptcy proceedings. Preceding general proceedings were implemented, and are now mandatory whenever the commencement of bankruptcy proceedings is made by a constituent. In addition to the preceding general proceedings, two more separate preliminary proceedings were introduced. The first are the preceding proceedings used when the commencement is initiated by a debtor, while the second apply when wishing to implement pre-insolvency reorganisation. This report has developed the conditions and the manner of commencing insolvency proceedings without conducting preliminary investigation. Now there is a possibility for appointing a bankruptcy trustee by using the method of random selection whenever a proposal for commencing bankruptcy proceedings is made by the debtor. However, there is an exception to this rule when a creditor is the one submitting the proposal for commencing bankruptcy proceedings: he/she can suggest the appointment of a specific trustee from the list published by the Ministry of Economy. Another significant change that this revision introduced is the setting way too shorter deadlines, within which the judicial authorities of the bankruptcy proceedings should undertake certain procedural actions and reach a verdict. The bankruptcy judge’s power to deal with complaints in litigation, arising from disputing the claims, and with legal actions in specific commenced insolvency proceedings, was also made effective. With this reform, the provisions regarding the composition, work and vote of the Board of Creditors were changed, by removing all inconsistencies observed in the case law. Regarding the disposal of the bankruptcy estate, a new kind of sale was set: public electronic auction without starting price. After this review, the possibility of reorganising a debtor company should be mentioned, in cases when a reorganisation plan was submitted, thus avoiding legal consequences of bankruptcy proceedings. The creditors hold the right to submit comments and the plan may be accepted within 60 days, following a voting. As this novelty brought such big changes, certain bylaws were also issued in October 2014, relating to expert training and manners of acquiring certificate of expertise on developing a reorganisation plan, as well as on the method and implementation of electronic asset sales and determining the bankruptcy trustee’s fee. Rules for compiling the bankruptcy file, maintenance of the Register of Trustees, the form and content of the creditors’ claims and for regulating the manner of appointing a trustee using the method of electronic election, were also outlined. All the new amendments to the Bankruptcy Law were issued in November 2013, Article 23, for instance, which regulates the exam procedure for acquiring trustee authorisation. In December 2014, earlier bylaw relating to the exam has expired. In June 2014, new amendments and changes to the bankruptcy law were also issued, making it possible for this law to fall into compliance with the Law for Locking Bankruptcy Proceedings, partially relating to the provisions on the right to build a certain structure and the determination of the legal status of the property built, which all create the bankruptcy estate of the debtor. This law was issued in January 2014 and entered into force in March 2014. Its purpose is only the regulation of bankruptcy proceedings commenced under the laws applicable before 1997. In fact this law allows for separate, undeniably extra-judicial proceedings, according to which buildings included in the bankruptcy estate, which were not sold or had no legal status, shall acquire that status, thus increasing their value and at the same facilitating the purchasing procedure and the registration in the public records. This law regulates the sale of such property by public auction, conducted electronically, without starting price. If the property is not sold, its value shall be distributed to the creditors, based on the distribution plan developed by the bankruptcy trustee. Finally, with this law, the deadlines were shortened, within which judges are obliged to consider and decide upon civil cases in the bankruptcy procedure, regardless whether they were initiated or extended. To conclude, one can say that the reform is still ongoing, and the objective is, in one hand, to create conditions for the creditors to achieve a greater return on their claims through incorporating best practices the sooner the possible, and, on the other hand, to allow the debtor company to overcome its financial implications through reorganisation, whenever possible, so as to avoid any legal consequences of the bankruptcy proceedings.

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