The National Assembly passed on Wednesday changes to insolvency legislation which aim to help distressed companies reduce their debt burdens before the need arises to formally declare insolvency.
Passed by 51 votes to two, the changes to the financial operations, insolvency proceedings and compulsory dissolution act introduce a new instrument of "pre-insolvency procedure".
The procedure, also called "preventive restructuring", will allow large and medium-sized companies that could become insolvent within a year to restructure debt in agreement with creditors holding at least 75% of the claims and eliminate the causes of impending insolvency.
Aside from the pre-insolvency procedure, the new legislation determines seniority of claims in court-mandated debt restructuring procedures with the introduction of classes of creditors.
Another solution gives creditors greater leverage in determining that creditors holding 20% of financial claims may demand court-mandated debt restructuring.
The creditors' motion will also have precedence over a potential rival restructuring plan put forward by the debtor.
However, the changes scrap the condition that at least 50% of claims have to be paid within four years of debt restructuring.
It will also be possible as part of restructuring to spin off healthy parts of a company into a new entity.
Smaller creditors will enjoy better protection with a provision determining that court-mandated debt restructuring needs to be confirmed by at least 60% of all creditors with voting rights, which will prevent bigger creditors from imposing their conditions.
The overall procedure of court-mandated debt restructuring will be simplified by broadening the scope of companies eligible for "simplified procedure".
Until now only micro companies were able to apply for the simplified procedure, now companies classified as small can apply as well.
None of the stakeholders was completely happy with the changes, but there was consensus they they needed to be adopted as soon as possible anyway.
Justice Minister Senko Pličanič hailed the changes as enabling the revival of idle overleveraged companies, which have been a key issue in the country's economy.
Coalition parties backed him, while the opposition argued the changes fall short by for instance failing to enable pre-insolvency for all companies.
A lot of debate focused on the scrapping of the provision that ordinary claims in court-mandated debt restructuring proceedings must be repaid at least at a 50% rate in four years.
A majority of the expert public agrees with the deletion, while the Chamber of Trade Crafts and Small Business (OZS) opposed it because it believes it would enable abuse and trigger an uncontrolled wave of privatisation.
But the provision remains in the law with the exception granted when supported by 60% of the creditors both in terms of their claims and their number.
Source: Slovenia Times
