On 21 August 2024, Law No. 08/L-256 on Bankruptcy entered into force, replacing Law No. 05/L-083. The new law essentially retains most of the provisions of the previous legislation but introduces several important changes, including the following:
1. Application exclusively to business organizations
The previous law contained certain ambiguities regarding its applicability to individuals. The new law eliminates this uncertainty by expressly specifying that it applies exclusively to business organizations. Where the term “individual” was previously used, it has now been replaced with “individual business debtor”, making the law more coherent and clarifying its scope of application.
2. Jurisdiction
Following the establishment of the Commercial Court, the new law stipulates that bankruptcy matters fall within its jurisdiction. The First Instance Chambers handle bankruptcy proceedings at first instance, while the Second Instance Chambers review appeals.
An appeal does not automatically suspend the enforcement of first-instance court decisions unless the second-instance court decides otherwise. The deadline for deciding on an appeal is seven (7) days, and, as under the previous law, extraordinary legal remedies are not permitted in bankruptcy proceedings.
3. Involuntary initiation of bankruptcy proceedings by a single creditor
The previous law required at least two creditors to jointly initiate bankruptcy proceedings. Under the new law, a single creditor may initiate proceedings, provided that the outstanding debt amounts to at least EUR 30,000.
Where proceedings are initiated by two or more creditors, the minimum outstanding debt remains EUR 5,000, thereby clearly distinguishing between these two forms of initiation.
4. Enforcement proceedings as a prerequisite
An important development is the requirement that, before a creditor may initiate bankruptcy proceedings, a prior attempt to enforce the creditor’s claim must have been unsuccessful.
This requirement applies to both forms of involuntary initiation, whether proceedings are initiated by a single creditor or by multiple creditors.
5. Insufficiency of assets
A key element addressed for the first time by the new law concerns situations in which the bankruptcy debtor’s assets are insufficient to cover its debts.
Article 22 of the new law allows creditors to challenge the alleged insufficiency of assets if they believe that the debtor has concealed assets or carried out fraudulent transfers.
The court is required to notify the State Prosecutor of such allegations and suspend the proceedings for six months while a criminal investigation is conducted into offences under Chapter XXV of the Criminal Code.
6. Registration in the relevant registers
The new law provides that all relevant institutions, including the Kosovo Business Registration Agency, the Pledge Registry, commercial banks, the Chamber of Private Enforcement Agents and the Tax Administration of Kosovo, are required to record the initiation of bankruptcy proceedings against a debtor as soon as they receive notification from the court.
7. Objections to the final list of creditors
The new provisions regulate more clearly the procedures and deadlines for creditors to submit objections to the final list of creditors prepared by the bankruptcy administrator.
The court has a deadline of fifteen (15) days to decide on these objections.
8. Sale of assets in liquidation proceedings
The new law brings the procedures for selling assets during liquidation almost entirely into alignment with those applicable to enforcement proceedings.
Assets are sold through auctions organized by the bankruptcy administrator. The debtor has the right to challenge any sale before the court within fifteen (15) days, while the sale price is determined on the basis of professional valuations conducted by experts.
9. Reopening of bankruptcy proceedings
Another important addition introduced by the new law is the possibility of reopening bankruptcy proceedings within one year following their conclusion if previously undiscovered assets belonging to the debtor are identified.
The proceedings may be reopened even if the debtor has been removed from the business register.
Reopened proceedings may be conducted exclusively as liquidation proceedings, involving the sale of the newly discovered assets and the proportional distribution of the proceeds according to the creditors’ respective priority rankings.
10. Chamber of Bankruptcy Administrators and recruitment of administrators
The new law establishes the Chamber of Bankruptcy Administrators, of which every bankruptcy administrator must be a member.
Furthermore, the new law establishes procedures for the recruitment and licensing of bankruptcy administrators, which are managed and supervised by the Ministry of Justice.
As demonstrated above, the new law introduces significant improvements, providing a more sophisticated and structured approach to the management of bankruptcy proceedings.
The law strengthens creditor protection and facilitates debt recovery. These amendments aim to increase transparency and efficiency in bankruptcy proceedings, thereby contributing to a more stable and healthier business environment in Kosovo.
