The new law in the Bosnian and Herzegovinian entity Republic of Srpska (RS) provides companies with the possibility to overcome financial difficulties by participating in a process of out-of-court consensual financial restructuring administered and mediated by the RS Chamber of Commerce.
The law provides that the financial restructuring procedure can be initiated at an early stage of a possible financial insolvency where recovery of the debtor is still achievable. This entirely voluntary procedure is intended to precede pre-insolvency restructuring, bankruptcy or reorganisation in accordance with the Bankruptcy Law in RS.
A minimum of two creditors and one debtor must participate to conduct the process of financial restructuring, whereby at least one creditor must be a bank or other financial institution. A creditor-debtor relation is eligible for the financial restructuring procedure if (i) no restructuring procedure or bankruptcy procedure is initiated against the debtor in accordance with the Bankruptcy Law, (ii) the debtor is not insolvent within the sense of the Bankruptcy Law, meaning that the debtor will not be able to fulfil its obligations as they fall due, and (iii) the debtor's account is not blocked for more than 60 days consecutively.
The RS Chamber of Commerce conducts the financial restructuring procedure via an independent, neutral and impartial mediator, who can be appointed by the RS Chamber of Commerce or consensually by the parties participating in the financial restructuring from the Registry of Mediators. The mediator is a natural person who underwent a training programme for mediators in the financial restructuring procedure organised by the RS Chamber of Commerce.
In the course of the financial restructuring, the parties may, inter alia, agree to temporarily suspend fulfilment of any of the debtor's obligations to the creditor(s) participating in the restructuring; however, no measures may be imposed on the creditors that are not a party to the proceedings. Based on such agreement, any ongoing enforcement court proceedings between the parties shall be suspended. In addition, during the term of the agreement, the creditor will not be able to initiate any court proceedings for the collection of debt which is included in the financial restructuring, unless such undertaking is necessary in line with the statute of limitations rules.
The filing fee for the financial restructuring procedure is BAM 200 (approx. EUR 100), and the fee for conducting the procedure depends on the amount of the claim that is the subject of the financial restructuring and varies from BAM 500 (approx. EUR 250) to BAM 3.000 (approx. EUR 1.500).
NEW LAW DESIGNED TO SUPPORT COMPANIES IN DISTRESS, BUT WHETHER IT DIFFERS FROM EXISTING OPTIONS IS NOT YET CLEAR
The new law, adopted in the midst of the economic distress caused by the COVID-19 pandemic, may result in a positive effect on financially troubled companies by allowing them to redefine their relationship with their creditors for the purpose of maintaining their business operations, with institutional help by the Chamber of Commerce. For creditors, primarily banks and other financial institutions, this law provides additional (or alternative) means for reducing the level of non-performing loans and achieving the effective out-of-court and amicable settlement of claims.
The question is to what extent this procedure will differ from the already available means for restructuring claims, such as concluding a restructuring agreement or a mediation procedure before an expert mediator. Nevertheless, a general positive effect on the economy, which is still feeling the impacts of COVID-19, is expected by the RS legislator as a result of the new law.