What would the new Law on Voluntary Financial Restructuring bring to Bosnian businesses?

SARAJEVO, (Patria) - Following the adoption of the new Bankruptcy Law in Republika Srpska and the same law expected to be adopted soon in the Federation of BiH, the need for another new law has arisen – the Law on Voluntary Financial Restructuring in Bosnia and Herzegovina.

This law, which is already in effect in neighboring Serbia, regulates the conditions and methods of consensual financial restructuring of debts that legal entities, entrepreneurs, and individuals as mortgage loan beneficiaries have towards banks, microfinance institutions, and leasing companies.

Financial restructuring is voluntary and is carried out in companies that are not in bankruptcy proceedings. The process only covers business/commercial debts, but not debts to the state and tax administration. A condition for voluntary restructuring is also that there are at least two banks on the creditor side. The law provides for a moratorium on debts during the agreement period, i.e., the postponement of forced collection and other actions aimed at collecting claims, except for filing lawsuits for debt collection, in order to prevent statute of limitations.

In neighboring Serbia, where this law has been applied since 2012, 50 proceedings have been conducted so far, of which 1/3 of cases have been successfully resolved. The reason for the not-so-large number of resolved cases, according to the Chamber of Commerce of Serbia, lies in the fact that companies apply for voluntary financial restructuring too late.

"Late application by debtors is the biggest problem. Companies should apply for voluntary financial restructuring as soon as the first problems arise, the first inability to pay due installments. When companies fall into large debts and become second-tier payers, then negotiations with banks become very difficult" , the Chamber of Commerce of Serbia states.

In the process of Voluntary Financial Restructuring, the Chamber of Commerce is an institutional mediator to whom debtors turn. After submitting the request, the Chamber of Commerce continues negotiations with banks in a completely confidential process.