Bankruptcy proceedings are non-contentious proceedings initiated by the filing of a petition for the opening of insolvency proceedings or a request for the conduct of summary insolvency proceedings against a person who, within the meaning of the provisions of the Insolvency Act, may be an insolvency debtor. After the filing of a petition for the opening of insolvency proceedings, the court may, in various situations prescribed by law, issue a decision opening insolvency proceedings, suspending the proceedings, dismissing the petition as inadmissible, or rejecting the petition for the opening of insolvency proceedings. If the court opens insolvency proceedings against the debtor by decision, the legal effects of the opening of insolvency proceedings arise, some of which are procedural in nature and some substantive in nature.

Bankuptcy proceedings against a debtor are initiated by filing a petition for the opening of insolvency proceedings. Insolvency proceedings may be conducted against a legal person and against the assets of an individual debtor. An individual debtor is considered to be a natural person who is subject to income tax from self-employment pursuant to the provisions of the Income Tax Act and a natural person subject to corporate income tax pursuant to the provisions of the Corporate Income Tax Act.

The petition for the opening of insolvency proceedings is submitted on the prescribed form, the content and form of which are prescribed by the Ordinance on the Content and Form of Forms Used for Submissions in Pre-Insolvency and Insolvency Proceedings. Although Article 13 paragraph 4 of the Insolvency Act provides that the court shall dismiss as inadmissible a petition for the opening of insolvency proceedings that is not submitted on the prescribed form, court practice has taken the position that the court will nevertheless not dismiss such a petition if it contains everything that is contained in the prescribed form.

The ministry competent for judicial affairs is obliged to ensure the availability of the forms referred to in Article 13 paragraph 1 of the Insolvency Act on the website of the e-Bulletin Board of the Courts.

The initiation of insolvency proceedings is not permitted if pre-insolvency proceedings have been initiated against the debtor, until their completion. This is understandable since pre-insolvency proceedings are also non-contentious proceedings within which, due to the debtor’s business difficulties that have led to threatened insolvency, an attempt is made to reach an agreement between creditors and the debtor in order to regulate the debtor’s legal position and its relationship with creditors and to preserve its economic activity. Otherwise, in the event of the failure of such pre-insolvency proceedings, it can be expected that threatened insolvency will transform into insolvency, thereby fulfilling the insolvency grounds, which may lead to the opening of insolvency proceedings against the debtor.

However, if pre-insolvency proceedings have been initiated, such proceedings shall, in the event of suspension for reasons referred to in Article 64 paragraph 1 of the Insolvency Act (for example, if after the opening of pre-insolvency proceedings the debtor performs and makes payments that are not necessary for its regular business operations; further, if during pre-insolvency proceedings the debtor is more than 30 days late in paying wages owed to employees under an employment contract, work regulations, collective agreement or special regulation, or under another act regulating the employer’s obligations towards employees due after the opening of pre-insolvency proceedings, or if within that period the debtor fails to pay contributions and taxes related to wages, calculated from the day on which wages were due), pursuant to Article 64 paragraph 2 of the Insolvency Act, continue as if a petition for the opening of insolvency proceedings had been filed, unless the court determines that the debtor is solvent and has fulfilled all obligations towards creditors.

During liquidation proceedings, the initiation of insolvency proceedings is permitted until the distribution of assets has been carried out. The distribution of a company’s assets is carried out pursuant to Articles 124 and 378 of the Companies Act after the company’s debts have been settled.

It should be added that Article 437 of the Insolvency Act provides that insolvency proceedings over the assets of a legal person that has ceased to exist shall be conducted when the liquidator, in liquidation proceedings over the assets of a legal person that has been deleted from the court register, determines on the basis of filed claims that the assets are insufficient to satisfy all creditors’ claims with interest. In such a case, the insolvency estate is entered into the court register, assigned a personal identification number, and the provisions of the Insolvency Act concerning the insolvency debtor and its bodies shall apply mutatis mutandis. Legal disputes may be conducted in the name and on behalf of such estate unless otherwise provided by the Insolvency Act. The insolvency estate is the holder of ownership and other rights.

Therefore, if the court determines the existence of procedural impediments referred to in Article 15 of the Insolvency Act, it shall dismiss the petition for the opening of insolvency proceedings by decision.

The petition for the opening of insolvency proceedings is submitted to the court on the prescribed form and contains identification data of the debtor and the petitioner, as well as a list of the debtor’s assets and liabilities. Identification data within the meaning of this Act consist of:

  • the company name or title, registered seat and business address, and personal identification number for a legal person;
  • first and last name, registered seat and business address, address of residence, and personal identification number for a natural person.

The list of the debtor’s assets and liabilities consists of an indication of:

  • the debtor’s immovable and movable property;
  • the debtor’s proprietary rights in property belonging to others;
  • monetary and non-monetary claims of the debtor;
  • other rights constituting the debtor’s assets;
  • funds in bank accounts;
  • other assets of the debtor;
  • the debtor’s obligations entered in its business books;
  • other monetary and non-monetary obligations of the debtor;
  • separation rights over the debtor’s assets;
  • exclusion rights;
  • average monthly costs of regular business operations of the debtor in the last year;
  • court or administrative proceedings in which the debtor is a party and the amount or description of the claim that is the subject of such proceedings.

After receiving the petition for the opening of insolvency proceedings, the court shall examine whether the petition is comprehensible and contains everything necessary for proceeding upon it. If the petition is not comprehensible or does not contain everything necessary for further proceedings, the court shall, by order, instruct the petitioner to correct or supplement the petition pursuant to Article 109 of the Civil Procedure Act in conjunction with Article 10 of the Insolvency Act. If the petitioner fails to correct the petition within the prescribed period, the court shall, pursuant to Article 109 paragraph 4 of the Civil Procedure Act, determine by decision that the petition is deemed withdrawn, and if the petition is returned without correction or supplementation, the court shall dismiss it by decision.

The court is obliged, within three days, to publish the petition for the opening of insolvency proceedings on the website of the e-Bulletin Board of the Courts. If two or more petitions for the opening of insolvency proceedings have been filed, the court shall conduct a single procedure for all petitions and render a joint decision. However, if a petition for the opening of insolvency proceedings and a request for the conduct of summary insolvency proceedings have been filed against the same debtor, due to the specific rules governing summary insolvency proceedings, it is not possible to conduct a single procedure and render a joint decision. Therefore, the procedure initiated earlier shall be conducted first, and only after its final completion shall the other procedure be conducted. In doing so, courts are obliged to take into account the urgency of such proceedings.

The petition for the opening of insolvency proceedings may be withdrawn until the issuance of a decision opening insolvency proceedings or a decision dismissing or rejecting the petition. In such case, the court shall issue a decision suspending the insolvency proceedings.

A petition for the opening of insolvency proceedings may be filed by a creditor or the debtor unless otherwise provided by law, while a petition for the opening of insolvency proceedings over the assets of an individual debtor may be filed only by the individual debtor.

The obligation to file a petition for the opening of insolvency proceedings of a legal person is prescribed by Article 110 paragraphs 1 and 2 of the Insolvency Act.

Pursuant to Article 110 paragraph 1 of the Insolvency Act, the Financial Agency is obliged to file a petition for the opening of insolvency proceedings if a legal person has recorded unpaid payment bases in the Register of the Order of Payment Bases for a continuous period of 120 days, within eight days from the expiration of that period, unless the conditions for conducting summary insolvency proceedings are met.

A petition for the opening of insolvency proceedings of a legal person on behalf of the debtor may be filed by: persons authorised to represent the debtor by law, members of the management board of a joint-stock company, the liquidator of the debtor, a member of the supervisory board if there are no persons authorised to represent the debtor by law, and a member of a limited liability company if the debtor has no supervisory board and no persons authorised to represent it by law.

If the petition for the opening of insolvency proceedings is not filed jointly by all persons authorised to represent the debtor by law, or by all members of the management board of a joint-stock company, or by all liquidators of the debtor, the petition shall be admissible only if the petitioner makes the existence of insolvency grounds probable (insolvency or over-indebtedness).

Persons authorised to file a petition for the opening of insolvency proceedings on behalf of a legal person are obliged to file such petition without delay, and no later than 21 days from the day the insolvency grounds arise. If they fail to do so, they shall be personally liable to creditors for the damage caused by the failure to fulfil this obligation. The right to claim damages becomes time-barred five years from the date of the opening of insolvency proceedings.

A creditor is entitled to file a petition for the opening of insolvency proceedings against a legal person if the creditor makes the existence of its claim and the insolvency grounds probable. A creditor who has the status of a secured creditor must, in addition to these two conditions, also make it probable that the claim cannot be fully satisfied from the asset to which the security right relates.

The court is obliged to examine the admissibility of the petition for the opening of insolvency proceedings. The probability of the existence of the petitioner’s claim against the debtor and the probability of the existence of insolvency grounds are cumulatively prescribed prerequisites of the creditor’s procedural standing as petitioner. If the creditor fails to make probable the existence of either of these prerequisites, the court shall dismiss the petition for the opening of insolvency proceedings by decision.

The petitioner is obliged to pay an advance of EUR 130.00 into the Fund for the Settlement of Insolvency Proceedings Costs and, upon the court’s order, within eight days an additional advance payment which may not exceed EUR 2,700.00. The following are exempt from the obligation to pay the advance: employees and former employees if they filed the petition in order to satisfy claims arising from employment, the Financial Agency if it filed the petition pursuant to Article 110 paragraph 1 of the Insolvency Act, and the Republic of Croatia.

The court shall immediately after receiving the petition request from the Financial Agency information on the provision of funds for the settlement of insolvency proceedings costs.