European Restructuring Monitor (ERM)
Eurofound's ERM database on restructuring-related legal regulations provides information on regulations in the Member States of the European Union and Norway which are explicitly or implicitly linked to anticipating and managing change.
Act 7/2005 - 3, 11, 108-120, 129-135, 143-148, 151-156, 203b Act 111/2022 - 7, 10, 17, 35
According to the Act, a company at risk of insolvency, or a creditor of a company at risk of insolvency, may decide to file for reorganisation or for bankruptcy if the insolvency is considered imminent.
If there is a filing for reorganisation, the company has to submit a reorganisation plan to the court and the court will appoint a trustee who is in charge of inspecting the plan and giving an opinion to the court. If the opinion is positive, i.e. the company has reasonable probabilities of getting out of insolvency, the court authorises the start of restructuring no later than 15 days after the presentation of the plan. The company's assets are then protected from individual claims to allow for normal continuation of operations. During the restructuring, it is not allowed to carry out organisational changes at the debtor such as a merger, fusion or split off.
If the opinion is negative, the court orders the termination of the reorganisation proceedings. Creditors have a role too, as the reorganisation plan must be approved by the majority of each group of secured and unsecured creditors within 90 days of the start of the proceedings. If the creditors' committee rejects the plan, the reorganisation is converted into a bankruptcy procedure.
The reorganisation proceedings are terminated by order of the court on indication of the trustee. The reorganisation might have a positive outcome, i.e. the company is able to return to normal business operations, or a negative one where further bankruptcy procedures will follow. Once the reorganisation plan is completed a notice is published in the Official Business Journal.
On 1 January 2016, amendments to the Act No. 7/2005 (Article 10a) introduced a new tool that may mitigate the work of bankruptcy trustees. This is the public Register of bankrupts (Register úpadcov] (https://ru.justice.sk/ru-verejnost-web/pages/searchKonanie.xhtml?query=)) - an information system providing comprehensive information on all ongoing bankruptcies in the country. From 1.10.2025, the Insolvency Register will be introduced instead of the Register of bankrupts (article 203b of act No 7/2005), where data on bankruptcy proceedings, data on restructuring proceedings, data on debt relief proceedings and events that occurred in the debt relief proceedings, data on public preventive restructuring, data on liquidation are recorded.
Since July 17, 2022 (Act No. 111/2022 Coll. on the resolution of imminent bankruptcy), it is possible to apply preventive restructuring as a new method of company recovery in Slovakia. The aim is to provide debtors with sufficient space for effective, efficient, fast and transparent preventive restructuring at the initial stage, when bankruptcy is "threatened", and thus prevent the debtor's bankruptcy. Preventive proceedings also include the institute of "new" temporary protection, when the court provides time for effective restructuring, for a period of three months. The prerequisite is that the debtor demonstrates to creditors the reality of his recovery plan. Preventive proceedings are simpler and less costly than formal restructuring. Moreover, if this procedure fails, the company does not automatically go into bankruptcy (as is the case if formal restructuring fails), but can continue to do business and find measures to resolve its difficulties.
The option to rescue the company through the restructuring procedure was applied in about 10% of recorded cases of insolvency in 2014-2016.
According to the experts, the number of companies using restructuring is long-term low. In 2020, during the COVID-19 pandemic, the number of insolvency cases increased. Nevertheless, the number of companies using restructuring was low. In total 22 cases were recorded. It is assumed that after the COVID-19 crisis the number of restructuring will increase. According to available information, the restructuring took place mainly in commerce, the manufacturing industry and construction and rather in small than medium and large companies.
A list of companies that requested for re-organization or filed for bankruptcy is available at [The public Insolvency Register] (https://ru.justice.sk/ru-verejnost-web/pages/statistiky/vyhlaseneKonkurzy.xhtml), which is run by Ministry of Justice.
Until mid-year of 2022, companies were safeguarded against bankruptcy by governmental protection measures, to mitigate effects of COVID pandemic, for example temporary protection against creditors, companies' financial reserves etc.. In 2nd half of 2022 effects of the pandemic, energetic crisis and war in Ukraine were on display in larger strength, therefore these companies would otherwise had gone bankrupt in 2020 already. In general, hospitality sector was mostly affected by the pandemic, however last year showed that companies in bankruptcy and reorganisation were retail and wholesale companies. In 2022, Slovakia experienced the highest number of b. and r. since 2017.
Up-to-date data on bankruptcies and reorganisation can be retrieved using the following link: Statistics - number of bankruptcies declared
Eurofound (2016), Slovakia: Rescue procedures in insolvency, Restructuring legislation database, Dublin, https://apps.eurofound.europa.eu/legislationdb/rescue-procedures-in-insolvency/slovakia
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