COMMENTARY: Challenges Facing Croatia’s Pre-Bankruptcy Procedure

24 February 2014, LPJ Croatia Issue 73

In July 2013, the Legislative & Policy Journal commented on the Croatian government’s newly implemented policy of pre-bankruptcy procedure to save failing businesses in Croatia (LPJ 046), and we concluded that the subjective and discriminatory manner in which the Pre-bankruptcy Act was being implemented by government institutions disclosed concerning issues of by-passing democratic processes.

In the meantime, the realisation of hundreds pre-bankruptcy procedures has resulted in numerous positive examples of rejuvenating struggling (and financially blocked) businesses, which is the rationale for the government policy and legislation.

However, there is also no definitive and transparent criteria for which failing enterprise will be salvaged through the procedure (e.g. Dalekovod, Industrogradnja, Metronet, Varteks, IGH, Cammeo, Magma etc.) and which enterprises will be allowed (i.e. forced) to fail (e.g. Mirna, One2Play.)

Also, our publication continues to point out the deficiency in the legislation, related to the discrimination of individual creditors, as opposed to preferred creditors, which also becoming a focus and concern of the European Commission with speculation that Prime Minister Zoran Milanovic (SDP) will soon end retract the legislation, thereby reducing the influence of Finance Minister Slavko Linic (SDP)…

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