TIRANA, March 15 – The Albanian government has drafted a new bankruptcy law, simplifying the existing prolonged procedures and speeding up the approval of reorganization plans which is also expected to have a positive impact on the further reduction of non-performing loans.
Drafted with technical assistance from the World Bank and the IMF, the new bankruptcy law is expected to be submitted to Parliament by end-June 2016.
“It will incorporate best international practices, simplify the existing framework, allow for expedited approval of reorganization plans, and protect the economic and governance rights of secured and unsecured creditors,” the government says.
“The bankruptcy law, which is still being consulted among state institutions, focuses on debtor companies, not to take them out of the market as bankrupt, but to give them the opportunity to pay off debts and repay creditors,” says Klajdi Mati, the bankruptcy director at the justice ministry.
Lengthy bankruptcy procedures are one of the main concerns for the business community. The average duration of insolvency proceedings in Albania is 2 years while the cost of the proceedings, calculated as a percentage of the estate’s values is estimated at 10 percent, according to the latest Doing Business report published by the World Bank. Albania ranked 42nd out 189 countries in resolving insolvency in the 2016 Doing Business report, losing 2 places from the previous report.
The new law along with the introduction of out-of-court procedures of debt restructuring improving collateral execution, amendments to the Civil Procedure Code to speed foreclosure procedures and debt collection are expected to further reduce non-performing loans and stimulate sluggish credit.
Further reducing the level of non-performing loans, currently at 17 percent from a peak level of 25 percent in mid-2014, is also considered key for the recovery of credit.
The new draft law has also extended the circle of monitoring entities not only within the scope of Bankruptcy Agency, the court of bankruptcy, the supervisor, also adding the role of the Prosecutor’s Office, of the High State Audit or that of the Supervisory Authorities of various sectors in the public interest.
The role of these entities pertains receiving information or verification of documents, court decisions, the plan of reorganization, of restructuring debt or transfers of the last three years of the entity before going bankrupt in order to avoid abuse or fraud in bankruptcy proceedings. The draft law provides that “… upon obtaining a copy of the decision to open bankruptcy proceedings, the prosecutor, in order to avoid abuse or fraud with the bankruptcy proceedings, verifies the transfers and the legal actions related to assets of the debtor and persons related to him/her, carried out at least during the last three years before the opening of insolvency proceedings”.
Regarding the debt restructuring through an extrajudicial agreement to be approved by the court, the draft law provides a set of provisions that envisage the reorganization alongside debt restructuring as part of an extrajudicial settlement through alternative dispute resolution, reaching an agreement that ought to be approved by the court.
