As a result of major market changes, business entities more often suspend their operations and become insolvent, during which arises the question of the collectability of the claims of their creditors and associates, as well as persons who are in other relationships with such insolvent business entities.

The legislative framework governing bankruptcy provides partial answers. However, certain questions still remain unanswered in the shining shadow of legal gaps.

The legal instrument of reorganization plan is in practise often misued. For example, the plan is proposed just to to obtain a period of moratorium (in which the execution proceedings can not be run against the debtor), there are subsequent reorganization plans (so called „Chapter 22“) for the same debtor and plans are proposed even where there are no real economic grounds.

​On 8 June 2018, the Serbian Parliament adopted the Law on Financial Collateral ("FC Law") which will become applicable on 1 January 2019. Financial agreements that are not fulfilled by 1 January 2019 will be implemented pursuant to the rules that were in force before that date.

Long-awaited amendments to the Insolvency Act, proposed back in October 2016, were finally adopted by the Serbian Parliament, and came into force on 25 December 2017.

Improvement of the position of secured creditors and boost to fresh money

The most recent Amendments of the Serbian Insolvency Act (“Amendments”) put more control into creditors’ hands over the insolvency process, allowing them to propose to the insolvency administrator to be appointed in the process. It also introduced more transparent provisions on the cost advance that has to be paid with the application for insolvency, as well as less restrictive provisions on the proposers of reorganization plans.

On 7 December 2018, Serbian Parliament passed yet another Act on Amendments of Bankruptcy Law that will be applicable as of 1 January 2019.

These changes make the third change of the Bankruptcy Law in less then a year.

Non-performing loans (NPL) are one of the principal problems of Serbian banking sector. Since 2009, number of domestic and international institutions have conducted various studies regarding NPL growth and have concluded that such growth is indicative of relevant macroeconomic factors. The main macroeconomic reasons for NPL growth in Serbia since 2008 have been increasing unemployment, currency depreciation and higher inflation rate. 

Introduction

The Serbian companies registry – Business Registration Agency - announced on the 20th of October, 2017, that, as of that date, it will start implementing the provisions of the Serbian Company Law regulating the compulsory liquidation of companies. These provisions have actually been in force for more than 5 years now, but they have not been implemented by the registry thus far.

The Companies Act introduced in 2011 the obligation of the Serbian Business Registers Agency (SBRA) to institute compulsory liquidation over companies for failure to comply with legal obligations under the statute. SBRA is, inter alia, obliged to initiate compulsory liquidation over a company which has failed to:

(a) submit its annual financial statements for the previous year until the end of the current year;