Bankruptcy proceedings commence with a petition for bankruptcy filed either by the debtor, their creditors, or the liquidator of the legal entity in question. In addition, there is specific legislation which may, in certain circumstances, entitle other persons to file for bankruptcy or require a statutory body of the debtor to file for bankruptcy.
The petition must be submitted to the court by the debtor within 30 days following their determination of insolvency. A creditor may file a petition after 30 days of the debtor's inability to meet its financial obligations.
The court will examine the submitted petition and if a debtor meets the above mentioned conditions, the court issues a resolution on the commencement of bankruptcy proceedings within 15 days from the service of petition. In addition, the court appoints a preliminary administrator whose role is to ascertain the debtor's assets and to review its books and records. Once a preliminary administrator has been appointed, the debtor may only dispose of assets with the consent of the administrator; anything done without such permission is null and void, i.e. the debtor may not do anything that would lead to a reduction of assets, but the debtor may carry on its normal business activities.
The court may decide, after the findings of the preliminary administrator have been submitted, to pass a resolution declaring bankruptcy or dismiss the case.
If all conditions for declaring bankruptcy have been met, the court will issue a resolution declaring bankruptcy and also appoint a bankruptcy administrator. From that moment, all creditors have 45 days to file their claims.
During the bankruptcy proceedings, the administrator carries out the administration of the debtor’s assets, converts the debtor’s assets (the bankruptcy estate) into cash and then distributes the collected cash amongst the creditors according to their statutory or contractual ranking and priority.
The main consequences of the bankruptcy resolution are:
non-matured receivables and liabilities of the debtor become immediately due and payable all instructions, powers of attorney and outstanding proposals of the debtor for concluding contracts that have yet to be acted upon are cancelled and have no effect setting-off receivables due to the bankrupt debtor is prohibited execution proceedings against the assets of the debtor are prohibited and if execution proceedings are in process they are suspended all acts of the debtor relating to its assets and undertakings are declared null and void a party entering into a contract with the debtor after the issue of the declaration of bankruptcy is entitled to repudiate it, unless they were aware of a declaration of bankruptcy over the debtor the right to act on behalf of the debtor in labour relations passes to the bankruptcy administrator civil and other proceedings are suspended if they relate to assets which have been included in the bankrupt estate.