On October 12th, 2019, Republika Srpska’s new liquidation procedure act went into effect (“the Act”). This statute marks Bosnia and Herzegovina’s first introduction of the expedited voluntary liquidation process (“B&H”). Generally speaking, the liquidation process is still one that is used by commercial entities with the aim of fully and completely paid off all of the company’s debts by liquidating its assets. After creditors have been paid in full, the remaining funds are divided among the stockholders of the company in accordance with their capital investments. Through the RS Chamber of Commerce and Industry, the business community of this B&H entity1, Republika Srpska (the “RS”), has appropriately spearheaded the introduction of this Act because, in practice, this procedure has been an extremely drawn-out, difficult, pricey, and burdensome(and expensive)process.
What it does and its advantages
The process begins with the competent business corporate body introducing a liquidation decision, on the basis of which the proposal for the launch of the shorter voluntary liquidation is presented, in accordance with Articles 51 to 56 of this Act. Such a plan is backed by a collection of required paperwork. In this process, the liquidation judge introduces a resolution on concurrently opening and ending the voluntary shortened liquidation, which is in contradiction to the previously applicable law (and the now anticipated standard voluntary liquidation procedure) (after determining the required conditions are met and documents submitted). When this resolution becomes completely enforceable, it is entered into the Registry of Business Entities, and the firm is then removed from the Registry. As can be observed, there is no regulation for this particular form of liquidation operation regarding the necessity of appointing a liquidation administrator. Consequently, it is reasonable to anticipate that this modification will lower the overall expenses associated with putting this approach into practice. Additionally, it might be argued that the process will be expedited overall if the liquidation judge brings a resolution regarding the simultaneous opening and conclusion of the process (assuming the appeal procedure and settlement of any outstanding debts will also be done in a quick and efficient manner).
Potential drawbacks
As previously stated, the proposal to begin the shortened liquidation procedure must be accompanied by a number of required documents, including:
- The shareholder(s)’ notarized statement attesting that all employee and creditor obligations have been satisfied.
- Certificates from the tax and indirect tax authorities attest that there are no unpaid direct and indirect tax liabilities.
The following are some reasons why these two pieces of material are so fascinating.
According to Article 55 of the Act, those who or those entities who provide the statement regarding creditor and employee obligations are jointly and severally accountable (without limitation) for a period of three years following the deletion of the firm from the Registry. This liability is recorded in a unique registry along with information specific to the shareholder company or person. In particular, shareholders/investors who chose to conduct business through a limited liability company may find the unlimited joint liability imposed by this provision of the Act to be burdensome because, after the company ceases to exist, such shareholders are registered (and”tied” without restrictions) in a separate registry as liable for the debts of a company that has already been erased.
Take away
In conclusion, the revised RS liquidation procedure act should be viewed as a step toward establishing a more effective and inexpensive liquidation approach, in particular the abbreviated voluntary liquidation procedure described here(acting under the assumption that the participating administrative bodies and courts will act accordingly). Despite the fact that certain of this Law’s provisions are (unnecessarily) burdensome, the recently introduced Act could have a good effect on the business climate in RS and encourage the idea that doing business there is simpler.
