Draft Amendment To The Insolvency Act In Limbo

• Published date: 21 July 2022
• Subject Matter: Insolvency/Bankruptcy/Re-structuring, Financial Restructuring, Insolvency/Bankruptcy
• Law Firm: Wolf Theiss
• Author: Mr Simon Tecco

Background of the current status of implementation

As the 17 July 2022 deadline for Slovenia to implement the Directive (EU) 2019/1023 on Restructuring and Insolvency ("the Directive") is fast approaching, it is still not entirely clear exactly when and how its provisions will be transposed into Slovenian law.

A draft amendment of the main Slovenian insolvency law, the Financial Operations, Insolvency Proceedings, and Compulsory Dissolution Act ("Insolvency Act") that (among several other topics) provides for transposition has been in circulation among various state authorities and the interested public for over a year. This draft was prepared under the previous government; however, it has not been finally confirmed by the executive, nor has it been proposed to the National Assembly for adoption.

The necessity for insolvency law reform has been mentioned as necessary by the newly elected Government; nevertheless, whether or not it will adopt the draft in its current form remains to be seen.

In the course of public consultations, there have been notable criticisms to the proposed changes. The re-composition of the Government and National Assembly may offer those voices an opportunity to revisit these issues and pressure for different solutions.

The new Government and National Assembly would have to move quickly, if the deadline for transposition of the Directive is to be respected. However, Slovenia has missed such deadlines in the past, and it is conceivable that it may happen again, considering the broad scope of other legislative reforms announced by the Government.

Against this backdrop, it is impossible to accurately predict if, when and in what form the current draft amendment of the Insolvency Act will be adopted. Nevertheless, it remains possible that the mechanism of implementation of the Directive provided under the draft may survive any potential redrafts.

Contemplated scope of implementation

The current Insolvency Act already provides for a preventive restructuring mechanism for companies at risk of becoming insolvent within one year. The preventive restructuring process was introduced in late 2013 and provides for the restructuring of financial receivables of small, medium and large companies.

The process is a mix of contractual and court restructuring. It is formally initiated by the court and stops all enforcement of financial receivables. The debtor proposes the initiation of the process; however, creditors holding over 30% of all financial...