World Bank, SECO project to improve insolvency system

“The new legal framework will focus debt restructuring practices which prevent bankruptcy and reshape the debtor’s financial and organizing structure,” said Justice Minister Nasip Na诮
TIRANA, Sept. 29 – The World Bank and the Swiss government have launched a programme assisting the Albanian government improve its insolvency system, considering the weaknesses in the existing bankruptcy law and procedural and administrative bottlenecks in the process.
“The expected result of the program is to make Albanian debt resolution system more efficient by improving the insolvency frameworks and practices, which will lead to a strengthened avenue for non-performing loan prevention and resolution, increase returns to creditors and protect economically viable companies,” Mahesh Uttamchandani, IFC’s lead private sector development specialist, was quoted as saying.
In the long run, the programme is expected to reduce lending risks and lead to increased lending in Albania, said the IFC.
The programme is being supported by the IFC, the World Bank’s private sector lending arm, and SECO, the Swiss State Secretariat for Economic Affairs.
Albania’s Justice Minister Nasip Na诠announced the ministry and its Bankruptcy Supervisory Agency were drafting a legal package which will soon be submitted to interest groups.
“The new legal framework will focus debt restructuring practices which prevent bankruptcy and reshape the debtor’s financial and organizing structure,” he said.
Resolving insolvency ranked Albania 62nd out of 189 economies around the world in the 2014 Doing Business Report, up from 65th in the 2013 report. The report shows it takes 2 years to resolve insolvency in Albania compared to an average of 2.3 years in Europe and Central Asia. The cost of resolving insolvency is estimated at 10 percent of the estate while the recovery rate at 40.7 cents on the dollar.
The project with the IFC will work towards identification of the key legislative obstacles to the implementation of viable debt resolution mechanisms and then supporting the improvement and implementation of such legislation, says the IFC. The emphasis of reform will be on promoting rehabilitation of viable companies and increasing loan recovery. The program will also help develop provisions for fast-track recognition of negotiated out-of-court workouts for Albanian framework and will work on the review of the insolvency and other provisions to allow and promote pre-packaged solutions; on design and implementation of special filing and hearing procedures; and incentives that would encourage debtors and creditors to opt for out-of-court resolutions approved by the court in an expedited fashion. The program will also work on enhancing the capacity of relevant professionals such as judges, attorneys and business people, through training on the principles of bankruptcy and insolvency, valuation and maximization of assets. It will encompass activities and events that would lead towards increased awareness of each of the stakeholders’ roles and responsibilities, as well as of the individual and overall benefits of exercising the opportunity for debt resolution (versus liquidation).