Failure enforcement

A number of very important companies, called by the Albanian media “VIP companies” were at risk of being declared “Failed” by government agencies, reports the local press (Shqip, 5.09.2009). Among such important companies were Bankers Petroleum, qualified by the daily as the biggest single investor in the country and Eagle Mobile, the third operator of mobile telephony, which has been challenging over the past year the positions of the former two biggest mobile phone companies operating in the country.
Two contradicting laws on failures
The Tax Administration had filed in the Court of Tirana the request to declare these 27 companies as “Failed”. To declare the failure of an economic subject, the executive power refers to two laws, that of “Tax Procedures” and that “On Failure”, informs the newspaper. According to business groups these laws are confusing and not coordinated. The law on “Tax Procedures” may even overleap the law “On failure” and may in the practice of the administration take priority over the specific law on failures.
The specific law “On Failures” provides that a business entity is declared “Failed” by the Court of its seat, at the request of its creditor or its creditors, if liabilities to this or these latter are not liquidated by the business entity. The law on “Tax Procedures”, (the fiscal legislation), provides that the tax administration may be entitled to ask to the Court of the seat of the business entity the declaration of failure of this latter. And this request may be filed not only for non-liquidation of tax liabilities, but also if these companies declare 3 consecutive non-profit years.
Drawing back
This was the case of the 27 companies that were assigned to the court according to the terms of the fiscal legislation and not the specific law “On Failures”. An intervention of the lawyers of these companies and the spread of the news in the media helped cut short the fiscal administration’s request, which was finally withdrawn. The 27 companies in the list will continue to exercise their activity.
The case pointed however the discrepancy of the business-concerning legislation and invoked pronouncements from different business representative groups. The reputed Association of Constructers of Albania (Shoqata e Nd쳴uesve t롓hqip쳩s멠is reported to have raised concern over the failure processes as initiated by the fiscal administration (Gazeta Tema, 6.09.2009).
Why a business may be non-profitable and not be failed
The Association’s vice-director, Ilir Hebovija, is reported to have suggested that a business entity may not be declared “Failed” unless that entity is not found in the situation of non-payment capacity. The Association of Constructers of Albania has explained some of the cases in which a business may be non-profitable for a consequent number of years without being in a failure position. For example, an enterprise that projects to construct a hydropower plant may register losses not only during the construction period, which may last over 5 years, but also in the first years of the hydropower plant’s exploitation.
Petrol-searching companies may also register losses for a number of consecutive years. Similarly a company that has decided to invest in raising producing capacities, building a producing unit, in the first years which include construction and pristine exploitation of these capacities, may be non-profitable for more than 3 consecutive years. The Association of Constructers of Albania sees failures as a normal process in a market economy and suggests a coordination of both laws on failures, with priority on the reasonable liberalization of brought about by the customary application of the law “On Failures”.