R&I Update - July 2022 – 1 / 6 观点
The new Slovakian preventive restructuring framework aims to provide companies with a viable toolkit to deal with financial distress at an early stage and to counter the fact that the majority of Slovak companies enter an insolvency process having been insolvent for more than a year.
The new regulation places an explicit duty on company directors to monitor the company's current and future solvency prospects and, where insolvency is likely, requires that directors adopt appropriate measures to avert it. The measures include court preventive restructuring plans and non-public preventive restructuring proceedings.
Where insolvency is likely, directors can apply to court for a public preventive restructuring plan provided the company is not facing enforcement action via execution. It can also ask the court for a three to six months stay on creditor enforcement action, provided a certain number of non-affiliated creditors agree.
Certain classes of creditors will not be affected by a public restructuring plan such as small creditors, creditors with small claims, creditors with disputed claims or employees.
A public plan must be approved by at least 75% of each class of unsecured creditors. A cross-class cramdown is possible where used in conjunction with a modified absolute priority rule (the equity holders must secure new equity in order to pay creditors at least 20% of their discharged claims).
Non-public preventive restructuring is aimed at restructuring debts owed to financial institutions and requires creditors' consent.
The new regulation emphasises the role of advisors who are responsible for the viability of the proposed restructuring plan. Rules on the protection of interim financing and new financing are included in the regulation.
The main obstacle to the use of the new regulation remains the unfavourable tax treatment of debts discharged in preventive restructuring schemes compared to those discharged in an insolvent restructuring.
The implementation of the EU Restructuring Directive in Slovakia comes into force on 17 July 2022 and will help companies to avoid insolvency.
To discuss the issues raised in this article in more detail, please contact a member of our Restructuring & Insolvency team.