Are there any schemes or arrangements which can be implemented in relation to a debtor company or business which is in financial difficulties (other than insolvency proceedings)? How do they affect the rights of a lender with security?
Under the Insolvency Act (Official Gazette no. 71/15, 104/17) the debtor company may opt to initiate pre-insolvency proceedings for the purpose of restructuring. In the course of such proceedings the debtor company puts a (financial and operational) restructuring plan to its creditors and if the plan is adopted by the creditors a settlement in the form of an enforceable court settlement is executed between the debtor company and its creditors. If no such settlement can be reached, the debtor company enters into insolvency proceedings (liquidation).
Lenders with a security (creditors with separate settlement rights) may participate in the restructuring process. If they choose to participate they must waive their rights to a separate settlement during the proceedings and – once the settlement is executed – for as long as the debtor company fulfils its obligations as set out in the settlement. In such a case these creditors are granted voting rights in respect of the restructuring plan and they will be bound by the plan and the settlement (their claims usually being restructured, e.g. partially written off or converted into equity), however, their securities either not being affected by the settlement or being partially affected – to the extent set out in the settlement. These lenders may choose not to participate in the restructuring proceedings, in which case they will not be bound by the settlement and they retain their security in full and may initiate settlement proceedings to enforce their security (foreclosure).
A separate law has been adopted for companies of strategic importance for Croatia, the Act on Extraordinary Administration for Companies of Systemic Importance for the Republic of Croatia (Official Gazette No. 32/17), the “Lex Agrokor”. It applies to Agrokor and its affiliates (at present) and it provides for restructuring proceedings (scheme of arrangement) under the management of an administrator appointed by the government. As regards the rights of secured lenders, the same rules as in case of a standard insolvency apply.
