Insolvency 2024 Comparisons

To understand the regulation of insolvency procedures in Croatia, it is essential to recognise that the Croatian Insolvency Act (Official Gazette: 71/15, 104/17, 36/22, 27/24) differentiates between two types of procedures: bankruptcy and pre-bankruptcy proceedings. These are distinct processes with different objectives. The insolvency procedure focuses on the collective settlement of creditors by liquidating the debtor’s assets and distributing the proceeds, ultimately leading to the cessation of the debtor’s existence. In contrast, the pre-bankruptcy procedure addresses the debtor’s legal status and their relationships with creditors, aiming to prevent insolvency and allow the continuation of business operations.

Insolvency proceedings are designed to facilitate the collective settlement of a bankrupt debtor’s creditors through asset liquidation and fund distribution. Although these proceedings can be initiated against both individuals and legal entities, the Croatian Insolvency Act does not establish a uniform process for both groups. It specifically applies to companies, while the insolvency process for individuals is governed by the Consumer Insolvency Act (Official Gazette: 100/15, 67/18, 36/22).

Furthermore, the Croatian Insolvency Act stipulates that pre-insolvency and insolvency proceedings cannot be initiated against (i) the Republic of Croatia and budget-funded entities, (ii) the Croatian Institute for Health Insurance, (iii) the Croatian Institute for Pension Insurance or (iv) local and regional self-government units.

Under Croatian law, depending on the case’s specifics, both voluntary and mandatory insolvency proceedings are permitted. Voluntary proceedings can be initiated by the debtor, while mandatory proceedings must be initiated by the financial agency if the legal entity has unexecuted payment bases listed in the Record of Order of Payment Basis for a continuous period of 120 days.

In addition to the financial agency, the proposal to open bankruptcy proceedings must be submitted promptly – ie, no later than 21 days after the bankruptcy date, by:

• a legally authorised representative of the debtor;
• a member of the board of directors of a joint-stock company;
• a liquidator;
• a member of the supervisory board of the debtor if no legal representatives are available; or
• a member of a limited liability company if the debtor lacks a supervisory board.

Filing for insolvency is mandatory in cases of illiquidity and over-indebtedness. Regular insolvency proceedings, such as bankruptcy procedures, typically result in the debtor’s liquidation.

While bankruptcy procedures can be either voluntary or mandatory, pre-bankruptcy procedures can only be initiated by the debtor, making them always voluntary. Restructuring plan proceedings, as well as insolvency plan proceedings and self-administration – which are often used together – are designed to restructure the debtor’s business.

Both insolvency procedures involve an appointed administrator who takes over the management of the debtor's business.

According to the Insolvency Act, the criteria for appointing a pre-insolvency administrator or trustee align with those for an insolvency administrator, covering oversight, accountability and compensation.

Article 24 of the Insolvency Act details the responsibilities of the insolvency administrator or trustee, which include:

• examining the debtor’s operations;
• reviewing the debtor’s asset and liability lists;
• verifying the legitimacy of reported claims;
• disputing claims if there are reasons to question their validity based on creditor communications or other factors;
• supervising the debtor’s activities – especially financial matters, the creation of obligations to third parties, issuing payment guarantees and the sale of goods or services – ensuring the debtor’s assets are not harmed;
• reporting to the court if the debtor violates any business restrictions;
• assisting the debtor in preparing or negotiating a restructuring plan;
• partially managing the debtor’s assets or affairs during negotiations, except in areas the debtor can freely manage;
• issuing necessary legal orders and certificates;
• monitoring the timely payment of pre-bankruptcy procedure costs;
• submitting progress reports to the court using the prescribed format; and
• performing other tasks as mandated by law. If not specified otherwise by law, the insolvency administrator has the rights and obligations of the debtor’s governing body.

If the bankrupt debtor continues operations during the bankruptcy proceedings, the insolvency administrator is responsible for managing the business and representing the debtor, focusing solely on matters related to the insolvency estate and acting as the legal representative of the debtor in insolvency (Article 88 of the Insolvency Act).

Unless otherwise stated in the Insolvency Act, the selection of an insolvency administrator is conducted through random selection from a list of administrators for the relevant court’s jurisdiction.

If the court determines that the randomly selected insolvency administrator lacks the necessary expertise or experience to effectively manage the proceedings, it may appoint another individual from the list of administrators for that court’s jurisdiction.

An insolvency administrator must be a person listed as an administrator in the jurisdiction of the competent court.

Certain individuals are ineligible for appointment as insolvency administrators, including:

• those previously employed by the debtor or serving on its governing bodies;
• close relatives of the judge or those responsible for obligations in the insolvency proceedings; and
• members of the debtor’s management or other governing bodies, creditors and anyone in competition with the debtor.

Additionally, individuals who are legally barred from serving on the debtor’s management or similar bodies cannot be appointed as insolvency administrators.

The court may dismiss the insolvency administrator, either on its own initiative or at the request of the creditors’ committee or assembly, if the administrator is not effectively performing their duties or for other significant reasons, particularly if they fail to comply with court orders.

The insolvency administrator has the right to appeal the dismissal decision. The creditors’ committee and any bankruptcy creditor who voted in favour of the dismissal at the creditors’ meeting may also appeal if their motion is denied.

The court can dismiss the bankruptcy trustee upon a justified personal request. Only the bankruptcy trustee has the right to appeal a decision that rejects their personal request for dismissal.

The Croatian Insolvency Act categorises different types of creditors. Specifically, as outlined in Article 137, insolvency creditors are defined as personal creditors of the debtor who have filed their undisputed claims at the onset of the bankruptcy procedure.

Bankruptcy creditors are grouped into payment lines based on their claims. Those in a later payment order can only receive payment after all creditors in the preceding order have been fully compensated. Among creditors within the same payment order, distributions are made in proportion to the size of their claims.

Moreover, the Croatian Insolvency Act also recognises rights for individuals who are not considered insolvency creditors, such as those entitled to separate their securities or assets and those with preferential rights, which may include insolvency creditors or others.

Claims against the insolvency estate are prioritised for payment from unsecured assets during insolvency. These claims emerge after the insolvency proceedings commence and include obligations related to court fees, procedural costs or contracts that have been newly entered into or continued by the insolvency administrator.

Under the Croatian Insolvency Act, the costs associated with insolvency proceedings, including the fees for the insolvency administrator, must be paid from the estate. Following these costs, preferential creditors with claims for new financing are next in line.

Employee claims against the insolvency estate that arose before the insolvency proceedings began do not have priority and are treated as unsecured creditors of a lower payment order. Similarly, claims for taxes, social security and related obligations prior to the commencement of insolvency proceedings do not receive preferential status.

For claims related to new financing, if insolvency proceedings are later initiated against the debtor, creditors with claims based on temporary or new financing will be paid before other insolvency creditors, except those classified as “first higher payment order creditors”. Additionally, if insolvency proceedings are opened, the temporary and new financing cannot be challenged, and the providers of such financing are not liable for harming the interests of all creditors unless it is shown that there was a breach of principles of good faith, a conflict of interest or involvement in criminal activities.

In general, under Croatian law, secured creditor liens, security arrangements and other claims can be released by satisfying the claim of the secured creditor.

Croatian law distinguishes between movable (1–5 in the following list) and immovable property (6–7), as well as between claims and rights, as follows.

1) Pledge: A legal mechanism that creates a lien on movable property rights or claims in favour of the pledgee. Common examples include receivables, bank accounts and share pledges.

2) Retention: The seller retains ownership of goods until the purchase price has been paid.

3) Guarantee: A unilaterally binding contract where a third party agrees to assume responsibility for the debtor’s obligations to the creditor.

4) Promissory note: A private document notarised by a public official, in which the debtor consents to the seizure of all or specific accounts held with entities conducting payment transactions, allowing funds to be paid directly to the creditor according to the debtor’s instructions. Notably, as a writ of execution, a promissory note enables the creditor to initiate execution against all of the debtor’s assets.

5) Assignment of claim for insurance purposes.

6) Mortgage: A voluntary lien established on property without transferring possession to the creditor, which does not grant the creditor the right to retain possession of the property.

7) Fiduciary: A legal security for a claim where the debtor transfers ownership of an item to the creditor to secure the fulfilment of the claim.

In the pre-insolvency procedure, the rights of unsecured creditors may be influenced by restructuring plan proceedings. However, affected unsecured creditors (along with affected secured creditors) can block the implementation of the restructuring plan if their stakeholder group fails to achieve the necessary majority for its adoption.

During insolvency proceedings, unsecured creditors have participation rights and will be compensated in proportion to the amount of their claims. As unsecured creditors make decisions as a collective assembly, they cannot engage with the proceedings individually.

In Croatia, there is no dedicated legal framework for out-of-court financial restructuring or workouts.

The Croatian Insolvency Act does not address out-of-court settlements or debt restructuring, meaning there are no informal mechanisms or formal procedures outlined in the general rules or the law itself.

The Croatian Insolvency Act offers two options, both requiring court proceedings.

• The first option allows those who meet the necessary conditions to initiate pre-insolvency proceedings. A company could have pursued this option at the onset of an account freeze, before any significant harm occurred.
• The second option is the mandatory insolvency procedure, which involves liquidating the debtor’s assets and settling their claims. The financial agency plays a critical role in this process, automatically triggering insolvency proceedings in the competent commercial court after 120 days of the company being blocked.

The Croatian Insolvency Act allows for both pre-insolvency financial restructuring through a restructuring plan and insolvency financial restructuring via a bankruptcy plan.

Pre-Insolvency Financial Restructuring

The restructuring plan in the pre-insolvency procedure is designed to reorganise and restructure the debtor’s finances. It must include legally required information, such as details about the debtor’s estate, the causes of the financial crisis, proposed measures for crisis management, the basis and impact of the restructuring plan, and an analysis of all claims by type and amount (including claims from employees and former employees, exclusive rights, separate rights, ongoing claims, unsecured claims and others). The plan should also outline any proposed debt restructuring measures, the anticipated costs of restructuring, the categories of claims unaffected by the plan and a structured offer to creditors grouped according to relevant classification rules, detailing the methods and terms for settling claims.

The final plan requires approval from the affected creditors and confirmation by the court.

Creditors with established claims are entitled to vote. They must submit their votes in writing using a prescribed form, which must be filed with the court before the voting hearing and signed by an authorised individual. If creditors do not submit their forms on time or provide unclear voting information, they will be considered as having voted in favour of the restructuring plan.

Each group of creditors with voting rights votes separately on the plan. All creditors within the same group share equal rights and will be compensated proportionally based on their claims.

The restructuring plan will be deemed accepted if the majority of creditors in each group vote in favour, and the total claims of those in favour exceed twice the total claims of those against.

Creditors with a common right or those whose rights were combined before the pre-bankruptcy situation are counted as a single creditor during the voting process.

Once confirmed by the court, the plan becomes legally binding and effective.

Affected creditors have the right to appeal the court’s decision to confirm the restructuring plan.

Insolvency Financial Restructuring

As per Article 303 of the Croatian Insolvency Act, after insolvency or bankruptcy proceedings begin, a bankruptcy plan can be drafted, allowing for deviations from legal provisions regarding the liquidation and distribution of the bankruptcy estate.

The restructuring plan includes both a preparatory and an implementation basis.

The preparatory basis outlines measures taken before the bankruptcy proceedings began or planned actions to establish the groundwork for realising participants’ rights. It must also provide all pertinent information regarding the foundation and consequences of the bankruptcy plan, which are crucial for creditor decision-making and court confirmation.

The implementation basis details how the bankruptcy plan will alter the legal positions of the debtor and other participants.

Participants in the bankruptcy plan are categorised into groups based on their rights. Creditors with different legal standings are placed in separate groups. It is important to distinguish between:

• creditors entitled to separate settlement rights, if the bankruptcy plan affects them;
• bankruptcy creditors not in a lower payment order;
• bankruptcy creditors in specific lower payment orders, if their claims persist according to the Insolvency Act; and
• shareholders and holders of other founding rights, if the plan impacts those rights.

Creditors sharing similar legal positions may be grouped based on their economic interests, with classification criteria specified in the bankruptcy plan. A special group is reserved for workers, and creditors with small claims may also form a distinct group.

If the bankruptcy plan’s effects are uniform for all bankruptcy creditors, they will not be divided into special groups.

The final restructuring plan requires approval from affected creditors and confirmation by the court.

Creditors with established claims have the right to vote. The plan is accepted if the total claims of those voting in favour exceed the total claims of those voting against. Once confirmed by the court, the plan becomes legally binding and effective.

Affected creditors may appeal the court’s decision to confirm the bankruptcy plan.

Regarding the fundamental principles and key elements of the statutory restructuring procedures in Croatia, see 4.1 Opening of Statutory Restructuring, Rehabilitation and Reorganisation.

If the company does not adhere to the terms of an agreed and confirmed restructuring plan, creditors have the right to seek enforced collection of their claims based on that plan, which serves as an enforcement document. Should the debtor be unable to meet the obligations outlined in the restructuring plan, leading to a realisation of insolvency, bankruptcy proceedings will be initiated.

The status of a company during insolvency procedures varies depending on whether it is undergoing a pre-insolvency procedure or an insolvency (bankruptcy) procedure.

Pre-insolvency Procedure

During the pre-insolvency procedure, from the date the proposal for its initiation is submitted until a decision is made to open the procedure, the debtor may only make payments essential for regular business operations. This includes gross salary payments to employees and former employees with due claims, severance pay up to the legally prescribed amount, compensation for workplace injuries or occupational diseases, as well as other necessary payments outlined by specific laws. The debtor is also prohibited from selling or encumbering their property during this time.

From the initiation of the pre-insolvency procedure until its conclusion, the debtor may:

• only make necessary payments for regular business operations and fulfil obligations from new debts that comply with the Insolvency Act;
• not settle obligations incurred before the opening of the pre-insolvency procedure, except for payments essential for regular operations; and
• take legal actions only with prior approval from the insolvency administrator or the court, if one has not yet been appointed – any legal actions taken by others will not be effective against creditors if it is evident that they exceeded the debtor’s regular business scope and were not approved.

Bills of exchange, checks, and other payment orders issued before the pre-insolvency proceedings are not charged to the debtor’s account during this period, although presenting such bills is allowed. However, a certificate must be issued indicating that payment was not made due to the initiation of pre-insolvency proceedings.

New Debt

The debtor may propose incurring new debt, with the consent of creditors holding more than two-thirds of the legally defined claims, for temporary financing that is necessary to ensure business continuity and enhance asset value during the pre-insolvency procedure.

Written consent must be obtained by the time of the restructuring plan voting hearing.

If the new debt for temporary financing complies with legal requirements, the court will establish the amounts, terms, and conditions for settling claims related to that debt.

In the restructuring plan, the debtor can include provisions for new financing from existing or new creditors that is essential for executing the plan without unjustly harming creditor interests, provided those creditors participate in the restructuring.

Insolvency Procedure

Given the purpose of insolvency proceedings – liquidating assets and settling creditors’ claims – the debtor is not expected to continue normal business operations.

Consequently, upon the opening of insolvency proceedings, the rights of the debtor’s legal entity are transferred to the bankruptcy trustee.

Similarly, the rights of an individual debtor to manage and dispose of property within the bankruptcy estate are also transferred to the bankruptcy trustee once insolvency proceedings commence.

Both insolvency procedures involve an appointed administrator who takes over the management of the debtor’s business.

The Insolvency Act stipulates that the criteria for appointing a pre-insolvency administrator or trustee are the same as those for an insolvency administrator, including oversight of their work, responsibilities and compensation.

The obligations of the insolvency administrator or trustee are outlined in Article 24 of the Insolvency Act and include:

• reviewing the debtor’s operations;
• assessing the debtor’s assets and liabilities;
• verifying the validity of reported claims;
• disputing claims if there are grounds for suspicion based on creditor communications or other reasons;
• supervising the debtor’s activities, particularly financial transactions, obligations to third parties, issuance of payment guarantees and sales operations, while ensuring the debtor’s property is protected;
• reporting to the court if the debtor violates business restrictions;
• assisting the debtor in preparing or negotiating a restructuring plan;
• temporarily managing the debtor’s assets or affairs during negotiations, except for parts the debtor can freely handle;
• issuing legally required orders and certificates;
• overseeing the timely and complete settlement of pre-bankruptcy procedure costs;
• submitting progress reports to the court in the prescribed format; and
• carrying out other tasks as required by law.

If not otherwise specified by law, the insolvency administrator holds the rights and responsibilities of the debtor’s governing body. If the bankrupt debtor continues operations during bankruptcy proceedings, those operations are managed by the insolvency administrator, who acts on behalf of the debtor and handles matters related to the insolvency estate, representing the debtor with the powers of a legal representative (as per Article 88 of the Insolvency Act).

The Croatian Insolvency Act recognises various types of creditors. Generally, as stated in Article 137, insolvency creditors are those personal creditors of the debtor who have submitted their undisputed claims at the time the bankruptcy proceedings commence.

Creditors in bankruptcy are categorised by payment priority. Those in a later payment order can only be paid after all creditors in the preceding order have been fully satisfied. Creditors within the same payment order are compensated in proportion to the amount of their claims.

The Act also acknowledges the rights of individuals who are not classified as insolvency creditors. This includes those entitled to the separation of their assets or securities and individuals who have a right to preferential treatment, regardless of whether they are insolvency creditors.

Creditors related to the insolvency estate are those liabilities that are prioritised for payment from unsecured assets during insolvency. These include obligations that arise after the insolvency has commenced, such as court fees, litigation costs, or contracts that the insolvency administrator has entered into or continued.

In pre-insolvency procedures, the rights of unsecured creditors may be influenced by restructuring plans. However, affected unsecured creditors (along with affected secured creditors) can block the implementation of the restructuring plan if their respective groups do not achieve the necessary majority for approval.

During insolvency proceedings, unsecured creditors have rights to participate and are settled in proportion to the size of their claims. Since these creditors make decisions collectively, they cannot individually interfere in the proceedings.

In pre-insolvency scenarios, creditors primarily focus on protecting their rights by voting on the proposed restructuring plan. They are then organised into distinct groups for voting on the final plan. Conversely, in insolvency procedures, creditors can exert their influence through the creditors’ committee and assembly.

The creditors’ committee is responsible for overseeing the insolvency administrator, assisting in managing affairs, monitoring business activities, reviewing financial records and verifying cash flow.

Members of the creditors’ committee are entitled to compensation for their efforts.

In addition to the bankruptcy trustee submitting quarterly reports to the court on the status of the bankruptcy estate and their activities, the work of the insolvency administrator is also subject to oversight by the court, the creditors’ committee and the creditors’ assembly, all of whom can request updates or reports at any time.

Creditors may have the option to receive or retain ownership of property related to their interests if all insolvency claims can be fully satisfied during the final distribution.

Specifically, Article 285 of the Insolvency Act states: “If the claims of all insolvency creditors can be settled in full during the final distribution, the insolvency administrator will transfer the remaining amount to the individual debtor”.

If the debtor is a legal entity, the insolvency administrator will distribute any surplus to each stakeholder in the debtor, corresponding to the portion they would receive in the event of liquidation outside of insolvency proceedings.

Croatian law offers various avenues for terminating a company, specifically through the insolvency proceedings outlined in the Insolvency Act and liquidation procedures governed by the Company Act.

The Insolvency Act defines two distinct procedures: a pre-insolvency procedure aimed at restructuring and continuing the debtor’s business, and an insolvency (bankruptcy) procedure intended for the collective settlement of creditors’ claims following the liquidation of the company.

Initiating insolvency proceedings involves restrictions on the debtor’s ability to manage property, with oversight from a designated manager.

There are key differences in how these procedures are initiated. The pre-insolvency procedure is voluntary and initiated by the debtor, while the insolvency procedure is mandatory, requiring specific parties to initiate it once the legal conditions are met.

In both procedures, creditors are invited to submit their claims, which may be challenged by the pre-insolvency manager, the insolvency manager or the debtor. Following a hearing to assess the claims, the court will issue a decision regarding the accepted and disputed claims.

The bankruptcy administrator’s activities are monitored by the court, the creditors’ committee and the creditors’ assembly, which have the authority to request updates or reports on any relevant matters within the administrator’s scope.

The liquidation procedure defined in the Company Act is conducted when grounds for terminating the company arise, provided there are no insolvency issues. In this case, all company members act as liquidators unless specified otherwise in the shareholders’ agreement. The liquidators represent the company within the limits of their business activities.

The liquidators are responsible for concluding ongoing affairs, collecting the company’s receivables, monetising remaining assets and settling outstanding debts. They may also enter into new contracts to complete existing work.

Once the company’s debts are settled, the liquidators must distribute any remaining assets to the members in proportion to their ownership shares, as determined by the final financial statements.

During liquidation, if there are no immediate creditor obligations, funds may be temporarily distributed. However, amounts required for settling outstanding or disputed obligations must be retained, along with reserves for final distributions to members.

If disputes arise among members concerning the distribution of the company’s assets, the liquidators will delay the distribution until the matter is resolved.

The liquidation procedure outlined in the Company Act occurs when there are valid reasons for terminating the company, provided there are no insolvency issues. All members of the company serve as liquidators unless otherwise specified in the shareholders’ agreement. Within their business scope, the liquidators represent the company.

The liquidators are responsible for finalising ongoing affairs, collecting the company’s receivables, monetising any remaining assets and settling creditor claims. They are also authorised to enter into new contracts to complete current projects.

Once the company’s debts are settled, the liquidators must distribute any remaining assets to the members in proportion to their ownership shares, as reflected in the final financial statements.

During the liquidation process, if there are no immediate creditor obligations, funds may be temporarily distributed. However, amounts necessary to cover any outstanding or disputed debts must be retained, along with reserves for final distributions to members.

If disputes arise among the members regarding the distribution of the company’s assets, the liquidators will defer the distribution until the issue is resolved.

Regarding the different ways the procedure(s) can end, see 5.2 Course of the Liquidation Procedure.

Regarding the rights and remedies shareholders, secured creditors and unsecured creditors have to enforce their rights/liens/security in an insolvency context, see 5.2 Course of the Liquidation Procedure.

In Article 1.a of the Insolvency Act, Croatia has adapted the EU’s Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, discharge of debt and disqualifications, and measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) 2017/1132 (Directive on restructuring and insolvency).

According to Article 8 of the Insolvency Act, in insolvency and pre-insolvency procedure, the commercial court in whose territory the debtor has its seat is exclusively competent (ie, has exclusive jurisdiction).

The basic principle according to Article 395 of the Insolvency Act is that the insolvency proceedings – and its consequences – are applied according to the law of the country in which the insolvency proceedings have been opened. The law of the “country of recognition” shall apply to separate and distinct rights on assets located in the country recognising the foreign decision on the opening of bankruptcy proceedings, if these assets were not located in the territory of the country in which the foreign insolvency proceedings were opened at the time thereof. If the rights over objects are entered in the public ledger, it is considered that the object is located in the state where the public ledger is kept. For labour contracts, the foregoing is exclusively relevant to the right of the country in which the labour contract is applicable.

According to Article 403 of the Croatian Insolvency Act, a foreign decision to open bankruptcy proceedings will be recognised if:

• it was issued by a court or authority with international jurisdiction according to Croatian law;
• it is enforceable under the law of the country where it was issued; and
• its recognition would not violate public order in the Republic of Croatia.

The court will reject a request for recognition of a foreign decision if it finds, due to an objection from the debtor or another participant, that the act initiating the proceedings was not delivered to the debtor in accordance with the law of the issuing country, or if the debtor’s fundamental rights to defence were violated during that procedure.

A foreign decision to open bankruptcy proceedings will also be recognised even if it is not yet final.

Considering that the rules of civil procedure apply in pre-bankruptcy and bankruptcy proceedings before commercial courts, which allow for co-operation between domestic and foreign courts, there are no barriers to such collaboration.

Foreign creditors register their claims and participate in the proceedings just like domestic creditors. The main consideration is whether the claim is governed by Croatian law.

Under the Insolvency Act, one of the key legal responsibilities of the board members of a debtor is to file for the opening of insolvency proceedings in a timely manner. Failure to do so can lead to personal liability towards creditors, drawing directly from the board members’ personal assets.

According to Article 110 of the Insolvency Act:

“The application for opening insolvency proceedings must be submitted without delay and no later than 21 days after the occurrence of the bankruptcy cause by (i) a person legally authorised to represent the debtor, (ii) a member of the board of directors of a joint-stock company, (iii) a liquidator, or (iv) a member of the debtor’s supervisory board, if there are no legally authorised representatives and if they could have known about the bankruptcy cause. Additionally, (v) a member of a limited liability company must act in similar circumstances if there is no supervisory board and no legally authorised representatives”.

These individuals are personally liable to creditors for any damages resulting from their failure to fulfil their responsibilities as outlined in this provision.

The right to claim damages expires five years from the date of opening the bankruptcy proceedings.

Once insolvency proceedings are initiated, the insolvency administrator is authorised to pursue the company’s claims.

According to the Insolvency Act, a key responsibility of the debtor’s board members is to file for the opening of insolvency proceedings in a timely manner. Failure to do so may result in personal liability to creditors, which can be enforced against the board members’ personal assets.

As stated in Article 110 of the Insolvency Act:

“The application for opening insolvency proceedings must be submitted promptly and no later than 21 days after the occurrence of the bankruptcy cause by (i) a person legally authorised to represent the debtor, (ii) a member of the board of directors of a joint-stock company, (iii) a liquidator, or (iv) a member of the debtor’s supervisory board, if no one is authorised to represent the debtor and if they could reasonably have been aware of the bankruptcy cause. Additionally, (v) a member of a limited liability company must also act in these circumstances if there is no supervisory board and no legally authorised representatives”.

These individuals are personally liable to creditors for any damages resulting from their failure to meet their obligations as outlined in this provision.

The right to seek compensation for damages expires five years after the opening of the bankruptcy proceedings.

Regarding the duties and personal liability of officers, see 7.2 Personal Liability of Directors.

Regarding other consequences for directors and officers, see 7.2 Personal Liability of Directors.

The Croatian Insolvency Act allows the insolvency administrator to challenge pre-insolvency transactions that undermine the right to equitable treatment of insolvency creditors, thereby disadvantaging certain creditors.

The actions that can be contested by the insolvency administrator are defined in the Act as follows.

• Preferential payments: Any action that grants a specific creditor security or settlement in accordance with their rights – referred to as congruent coverage – can be challenged if it occurred within the three months leading up to the application for insolvency, provided the debtor was unable to pay at that time and the creditor was aware of this inability.
• Post-application actions: Actions granting a specific creditor security or settlement after the application for insolvency can also be contested if the creditor was aware of the debtor’s illiquidity or the proposal for insolvency at the time of the action.
• Improper demands: If a creditor received security or settlement that they were not entitled to demand, or demanded improperly, this can be contested if the action took place within – or after – the last month before the insolvency application. Additionally, if the action occurred in the second or third month prior to the application, it can be challenged if the debtor was illiquid at the time, or if the creditor knew that the action would harm other creditors.
• Fraudulent transfers: Any legal actions taken by the debtor within the last ten years before the insolvency application, and which were intended to harm creditors, can be contested if the other party was aware of the debtor’s intentions.
• Actions without compensation: Any legal action by the debtor made without compensation – or for negligible compensation – can be challenged unless it occurred four years prior to the insolvency application (routine gifts of minor value cannot be contested).

Furthermore, any omission by the debtor that results in the loss of rights or secures property claims against them is treated as a legal action.

Finally, a collection agreement between the debtor and a close associate can be contested if it directly harms bankruptcy creditors. However, this agreement cannot be challenged if it was made more than two years prior to the insolvency application, or if the other party can prove that they were unaware of the debtor’s intent to harm creditors at the time the agreement was made.

The insolvency administrator is the individual entitled to pursue claw-back claims.