Reorganisation And The Bankruptcy Administrator
Albanian Bankruptcy Law (No.8901 of 23 May 2002), as amended by Law No.9919 of 19 May 2008 and Law No.10137 of 11 May 2009, which is an evident adaptation of German legislation, aims to establish non-discriminatory and mandatory rules for the repayment of obligations by debtors in a bankruptcy procedure and to ensure an adequate, reliable and effective mechanism for the reorganization or liquidation of a company that is facing financial difficulties.
Corporate Rescue and Reorganisation
This Bankruptcy Law provides that the debtor has some alternatives to bankruptcy which may be agreed upon during insolvency. One of the alternatives provided by this law is corporate rescue, thus, Albanian Bankruptcy Law recognizes the principle of corporate rescue.
The law has no specific provisions for restructure of the company outside a formal procedure. However, prior to submission of the petition for the opening of the insolvency proceedings, the debtor is not prohibited to try to achieve an out-of-court restructuring. It should be highlighted that although the law does not prohibit the out-of-court reorganization, the directors of the company are obliged to request the immediate initiation of an insolvency proceeding, not later than 21 days from the date the legal entity becomes insolvent. In the case that they do not proceed with such request they will be personally responsible for the compensation of the creditors if such creditors suffer losses because of the failure to file the petition within 21 days. Note also that Albanian Legislation does not have specific provisions for an expedited restructuring of the debtor by means of a pre-packaged sale.
The law provides that the reorganization of the debtor is possible and the mechanism for implementing the principle of corporate rescue is the Reorganization Plan (‘RP’) approved by the Creditors’ Assembly, agreed by the debtor and approved by a court judgment of the Bankruptcy Court and filed with the Court Registry. There is no draft RP available and the Bankruptcy Law merely provides about the elements (some of them mandatory) to be included in the RP. The Bankruptcy Law provides for the necessary quorum/majority for the approval of RP. This law does not have specific provisions related to the process for “cramming down” creditors who do not approve the RP. However, the law provides that RP cannot be approved by the Bankruptcy Court in the cases that this RP is objected from the majority of the bankruptcy creditors. In addition, this law provides that the creditors and the debtor, according to the Code of Civil Procedure, may initiate a special appeal related to the court decision for the approval of RP.
In addition, the Bankruptcy Law provides that the bankruptcy administrator can obtain new financing and the approval of the Creditors’ Committee (if any) or of the Creditors’ Meeting is indispensable. This law does not have specific provisions about the ranking of this new financing. However, according to the law, the “new financiers” are not prohibited to perfect a security for such new finance, thus, to become secured creditors and the “new financier” will be ranked in the same ranking with the other bankruptcy secured creditors (of course, in the case that the debtor does not succeed with the RP).
The law does not specifically provide for the length of RP. However, insofar as RP is important for purposes of payment of the creditors, the provisions related to termination of RP gives the lead to understand the maximum timeline the creditors ought to be paid during the implementation of the RP. The Bankruptcy Court decides on the termination of the supervision of the implementation of the RP when the creditors’ claims are satisfied or their fulfilment is secured or three years from the conclusion of the bankruptcy procedure (i.e. in this case the start of the implementation of the RP) and if there has been no new petition filed with the court for initiating a new bankruptcy procedure.
One can understand that the efforts to reorganise a debtor according to Albanian Bankruptcy Law is not an easy task. Therefore, the human resources participating in bankruptcy proceedings and especially the bankruptcy administrator(s) ought to be well-trained to perform such important duties.
According to the Bankruptcy Law, the Court may appoint the administrator who should duly and properly perform, during the whole procedure until it is closed, the duties stated in the law. The work of the Insolvency Administrator is supervised by the Insolvency Court and by the Creditors’ Meeting and the Creditors’ Committee (certainly, if any). With the opening of the insolvency proceedings, the debtor is deprived of his rights to dispose and manage the insolvency estate unless the court decides otherwise. It is the Insolvency Administrator who is appointed to possess and manage the insolvency estate.
The original law (i.e. prior to both amendments) did not have extended provisions with regard to bankruptcy administrator; the original law did not provide clearly specific criteria for the appointment of a bankruptcy administrator, except for the requirement that the administrator should have a background in economics. Therefore, to be appreciated is the effort to include in the law, through both recent amendments, further provisions regarding the qualities and the method of selection of the Bankruptcy Administrator. According to the existing legal provisions the bankruptcy administrator ought to be a certified auditor and independent from debtors and the creditors. The creation of the Bankruptcy Supervision Agency was a positive step forward as an institution that will be in charge to train and license the bankruptcy administrators. However, this Agency is yet far from the graduation of first administrators who are trained to have knowledge not only with regard to liquidation but also with regard to reorganisation in bankruptcy proceedings.
The lack of qualified bankruptcy administrators especially in reorganisation is one of the reasons why the Bankruptcy Law is not used to reorganise in the Albanian jurisdiction. Especially in these times of crisis, the use of bankruptcy related legal provisions to reorganise debtors requires from the Albanian authorities to speed up the process to prepare/license the generation of bankruptcy administrators who will be able to make possible the ‘fresh start’ of the debtors OR most important to ‘refresh’ the debtor to continue the activity without any important legal interruption.
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Ardjana Shehi has 20 years of experience as a lawyer and an extensive working experience in commercial law. Shehi joined KALO & ASSOCIATES in January 2005 and is already promoted as Partner. She holds a MBA Master Degree from the joint program of Nebraska University USA and Tirana Faculty of Economics. Since 2006 she is part of teaching team of the School of Magistrates, Tirana, as Trainer of continuous training for judges on bankruptcy law and tax law. Ms. Shehi is a co-author of the first legal bilingual dictionary (English-Albanian/Albanian-English) published in Albania. In addition, she is co author of the Judges Manual on Bankruptcy Law, product of a World Bank project, and she is also author of many articles published in Albania and/or abroad. Shehi is a board member in several legal and non legal organizations. Ardjana can be contacted on +355 4223 3532 or by email at firstname.lastname@example.org