Reasoning behind the changes
In the two years that the "new" bankruptcy regime – the Bankruptcy Act of September 2015 (Stečajni zakon; the "BA") – has been in place, the number of pre-bankruptcy procedures initiated in Croatia has plummeted to only 273, with 58 restructuring plans being accepted. By comparison, under the previous pre-bankruptcy regime from 2012 to 2015, 8,262 pre-bankruptcy procedures were initiated, with 2,224 restructuring plans being reached.
On 2 May 2018 the Croatian Constitutional Court ("Constitutional Court") upheld the Law on Extraordinary Administration Procedure for Companies of Systematic Importance for Croatia, better known as "Lex Agrokor".
In Judge Glenn’s recent lengthy decision recognizing and enforcing a restructuring plan in the chapter 15 proceedings of In re Agrokor1, a Croatian company in Croatian insolvency proceedings, he highlighted that the concept of comity – respect for rulings in other countries – remains an important U.S.
In October 2018 we have elaborated on the controversial “Act on Nullity of Loans with an International Element Concluded in the Republic of Croatia”, which was passed by the Croatian Parliament and entered into force on 29 July 2017 (“Act”).
The Act has been adopted via an urgent parliamentary procedure, without undergoing expert consultation procedure that usually precedes the procedure of passing the law with such a sensitive effect as it would be the interference with the acquired rights as a consequence of retroactive application of its provisions.
On 14 March 2020, the Croatian Ministry of Justice issued recommendations to prevent the transmission of the novel coronavirus (COVID-19) and control the pandemic ("Measures"). The Measures are applicable until 1 April 2020. The Measures advise temporary adjustments to legal requirements in civil, insolvency and criminal procedure law to avoid hardship that would otherwise arise as a result of the coronavirus crisis.
With the aim of further mitigating the negative effects of the crisis on companies and private individuals, the Measures advise the following:
Until entering into force of the Enforcement Act in 1996, the system of enforcement in Croatia had been regulated by the Act on Execution Procedure, a law which was inherited in a procedure of succession from former Yugoslavia. Since 1996 the system of enforcement underwent a number of substantial changes which main purpose was to make enforcement procedure more effective and at the same time less cumbersome for debtors.
The Financial Operations and Pre-Bankruptcy Settlement Act
The disadvantages and ambiguous interpretations that have frequently occurred in the implementation of the pre-bankruptcy settlement procedures preventing the achievement of the primary goal of the Financial Operations and Pre-Bankruptcy Settlement Act (“the Act”) - the establishment of liquidity and solvency of business entities – have provoked a need for detailed amendments to the Act. The second amendments to the Act which were published in the Official Gazette No.
1. Introduction
The system of claim enforcement in Croatia is primarily regulated by two core laws: (i) Enforcement Act (Official Gazette No. 112/2012 and 25/2013) determining procedure of mandatory enforcement of claims including the procedure of voluntary security of claims; and (ii) the Act on Enforcement of Financial Assets (Official Gazette No. 112/2012) providing legal framework for the enforcement of claims against financial assets.