Opinion of the European Central Bank of 5 November 2013 on financial restructuring of companies (CON/2013/75)
Date: 2013-11-05
Institutions: European Central Bank
Subjects: Slovenia, company in difficulties, financial intervention, financial solvency, financial stability, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 5 November 2013 

on financial restructuring of companies 

(CON/2013/75) 

Introduction and legal basis 

On 21 October 2013, the European Central Bank (ECB) received a request from the Slovenian Ministry 

of Justice for an opinion on a draft law amending the Law on financial operations, insolvency proceedings 
and  compulsory  dissolution1  (hereinafter  the  ‘draft  law’).  On  25  October  2013,  the  ECB  received  a 

revised version of the draft law. 

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning of the European Union and the sixth indent of Article 2(1) of Council Decision 98/415/EC of 

29  June  1998  on  the  consultation  of  the  European  Central  Bank  by  national  authorities  regarding  draft 
legislative provisions2, as the draft law relates to rules applicable to financial institutions insofar as they 

materially  influence  the  stability  of  financial  institutions  and  markets.  In  accordance  with  the  first 

sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council 

has adopted this opinion. 

1. 

Purpose of the draft law 

1.1  The existing Slovenian Law on insolvency regulates two types of court proceedings applicable to 

insolvent  companies:  (a)  compulsory  settlement  proceedings  aimed  at  restructuring  insolvent 

entities by, inter alia, restructuring their liabilities; and (b) bankruptcy proceedings aimed at their 

winding  up.  The  main  aim  of  the  draft  law  is  to  amend  the  Law  on  insolvency  with  a  view  to 

improving  financial  restructuring  of  distressed  companies  as  well  as the  efficiency  of  insolvency 

proceedings in general. 

1.2  To  this  end,  the  draft  law  (a)  proposes  certain  amendments  to  the  general  rules  on  compulsory 

settlements,  including  an  explicit  reference  to  the  ‘absolute  priority  rule’  pursuant  to  which  the 

compulsory settlement as a restructuring proceeding shall be carried out in a way that reflects the 

burden-sharing  rules  among  shareholders  and  different  classes  of  creditors  as  applicable  in 
bankruptcy proceedings3; (b) broadens the scope of simplified compulsory settlement proceedings 

1 

2 
3 

Zakon  o  finančnem  poslovanju,  postopkih  zaradi  insolventnosti  in  prisilnem  prenehanju  (ZFPPIPP)  (Ur.l.  RS  No 
63/2013-official consolidated text) (the ‘Law on insolvency’). 
OJ L 189, 3.7.1998, p. 42. 
See, in particular, Article 9 of the draft law amending Article 136 of the Law on insolvency. 

 
 
 
 
                                                 
ECB-PUBLIC 

to make them available to both micro companies and small companies4 and further simplifies the 

prerequisites  in the application of those proceedings; (c) amends some other  existing rules of the 

Law on insolvency to improve the bankruptcy proceedings and to streamline the role of the courts 

in  insolvency  proceedings;  and  (d)  introduces  regulations  for  a  new  form  of  restructuring 
proceeding for large or medium-sized companies5, as briefly described below. 

1.3  For large or medium-sized companies that are not yet insolvent but are likely to become insolvent 

within  a  year,  the  draft  law  enables  such  companies  to  apply  new  preventive  restructuring 
proceedings  proposed  by  the  draft  law6.  The  aim  of  such  proceedings  is  to  facilitate  early 

restructuring and to eliminate the causes for the insolvency of distressed companies by, inter alia, 

extending the  binding effects of a concluded  restructuring agreement  that has been confirmed by 

the  court  to  creditors  who  have  not  entered  into  the  restructuring  agreement,  subject  to  having  a 

certain  majority  of  creditors  supporting  the  agreement.  The  preventive  restructuring  proceedings 
are  focused  on  the  restructuring  of  financial  claims7,  so  that  binding  effects  of  the  restructuring 

agreement  may  be  imposed  only  on  dissenting  creditors  holding  that  type  of  claim.  Where  the 

restructuring  agreement  provides  for  the  restructuring  of  unsecured  financial  claims,  such 

restructuring may entail the reduction of the principal or the extension of the maturity of the claims. 

If the secured financial claims are to be restructured as well, only their maturity may be extended or 

the interest rate modified. 

1.4  Where  companies  are  already  insolvent,  they  may  be  restructured  within  compulsory  settlement 

proceedings, rather than liquidated in bankruptcy proceedings, if the former would likely result in 

better repayment conditions for creditors than the latter. To facilitate the restructuring of insolvent 

large and medium-sized companies within the compulsory settlement proceedings on the basis of, 

inter  alia,  the  required  majority  vote  in  relevant  creditor  classes,  the  draft  law  introduces  certain 
special rules8. Pursuant to those special rules, it will be possible, among other things, to provide for 

the restructuring of only unsecured ordinary financial claims rather than all ordinary claims, as well 

as the restructuring of secured claims, the pooling of collateral and spin-offs. If secured claims are 

to be restructured, such claims may be split and converted into two new claims, a secured and an 

unsecured claim, based on the market value of the assets, subject to security as determined within 

the  compulsory  settlement  proceedings.  The  secured  claims  may  be  restructured  by  way  of 

extension of the maturity or modification of the interest rate.  Since the restructuring of  insolvent 

large  or  medium-sized  companies  within  the  compulsory  settlement  proceedings  may  have 

significant effects to the stability of banks, Banka Slovenije shall be notified on the initiation of the 

proceedings. 

4 
5 
6 
7 

8 

As defined in Article 55 of the Law on companies (Zakon o gospodarskih družbah – ZGD-1). 
As defined in Article 55 of the Law on companies. 
See Article 4 of the draft law introducing a new Section 2.3 to the Law on insolvency. 
See  the  definition  of  ‘financial  claim’  in  Article  3  of  the  draft  law  introducing  a  new  article  20.a  to  the  Law  on 
insolvency. 
See Article 37 of the draft law introducing a new Section 4.8 to the Law on insolvency. 

2 

 
                                                 
ECB-PUBLIC 

2. 

General observations 

2.1  The ECB welcomes the draft law as it broadens and strengthens the procedures and tools available 

for the restructuring of Slovenian companies. The new amendments should provide more efficient 

options for preserving as a going concern companies that are in distress or already insolvent, but 

are deemed economically viable upon potential debt restructuring. Especially in connection to the 

latter  case,  the  clearer  stipulation  of  the  absolute  priority  rule  and  the  premise  that  creditors  of 

failing  companies  would  be  better  off  with  a  restructuring  rather  than  a  winding  up  of  insolvent 

companies, as required by the draft law, should contribute to the successful execution of corporate 

restructuring procedures. 

2.2  The  draft  law  contains  provisions  that  attempt  to  reasonably  and  proportionately  balance  the 

interests  of  both  the  debtor  and  its  creditors  in  a  restructuring  process.  Nevertheless,  the  ECB 

considers that the proposed significant changes to the existing regime could be accompanied by an 

economic  and  legal  impact  assessment  that  would  inform  authorities  about  the  potential 

implications of applying the restructuring procedures provided for in the draft law on the economy 

in  general  and,  in  particular,  on  the  balance  sheets  and  profitability  of  credit  institutions  in  their 

capacity as creditors of companies availing of the new procedures. 

2.3  Furthermore, the impact of the new procedures should be monitored on a  continuous basis and in 

the  event  that  risks  to  financial  stability  emerge,  the  framework  should  be  revised  to  address 

potential  adverse  impacts.  Such  monitoring  appears  warranted,  specifically  as  the  draft  law 

regulates  several  new  restructuring  solutions,  including  the  preventive  restructuring  proceedings 

and  special  rules  for  compulsory  settlement  proceedings  applicable  to  large  and  medium-sized 

companies  that  specifically  relate  to  credit  and  other financial  institutions  as  holders  of  financial 

claims as defined under the draft law. 

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 5 November 2013. 

[signed] 

The President of the ECB 

Mario DRAGHI 

3