Bankruptcy is a special non-contentious court proceeding carried out with the aim of collectively settling all of the bankruptcy creditors by encashing the debtor’s assets and distributing the collected funds to the creditors.
Bankruptcy usually results in the cessation of the debtor as a legal entity – a company (unless the creditors accept a bankruptcy plan agreed to by the debtor).
The debtor may be a legal person or an individual debtor, i.e. a natural person (payer of income tax from independent activities or a natural person who is a corporate taxpayer).
Reasons for bankruptcy are insolvency and excessive indebtedness. The debtor may propose the institution of bankruptcy proceedings if it is probable that the debtor will not be able to fulfill the existing and immediate liabilities (the debtor’s ability to fulfill due liabilities is threatened).
It is considered that the debtor is insolvent in the following cases:
Excessive indebtedness exists if the assets of a legal entity do not cover its current liabilities, unless:
Bankruptcy proceedings are instituted by submitting a proposal to a commercial court having real competence and territorial jurisdiction (in accordance with the head office of the legal person of the debtor) via a selected form.
If the debtor has no head office, a commercial court having real competence and territorial jurisdiction is the one located in the area of the debtor’s permanent residence.
If the debtor has no permanent residence, a commercial court having real competence and territorial jurisdiction is the one located in the area of the debtor’s temporary residence.
If the bankruptcy proceedings have already been instituted, pre-bankruptcy proceedings may not be instituted.
Bankruptcy proceedings may be instituted by:
The Financial Agency (FINA) has to submit a proposal to institute bankruptcy proceedings if the legal person has outstanding payments over an uninterrupted period of 120 days registered in the Payment Transactions Order Register, within eight days after the expiry of that period, unless prerequisites for summary bankruptcy proceedings have been met.
For a submission of the proposal for the opening of bankruptcy proceedings, the Financial Agency is entitled to reimbursement of the cost. The cost of submitting the proposal is covered by the advance payment for the settlement of the costs of the bankruptcy proceedings or by the Fund for Settlement of the Bankruptcy Proceedings Costs if the fee has not been collected from the advance payment. The amount and manner of payment of the fee is prescribed by the Minister responsible for the judiciary affairs by an ordinance.
Court documents are served by posting the document on the website e-Court Notice Board, unless otherwise stipulated by the Bankruptcy Act.
Exceptionally, the service of documents between the court and the Financial Agency as a body that takes action in accordance with the provisions of the Bankruptcy Act and acts upon decisions of the court is done through the single information system – e-File (eSpis).
The service of documents is deemed complete with the expiry of 8 days following the date of publication of the document on the e-Court Notice Board website.
Publication of the document on the e-Court Notice Board website is considered as proof that the service of documents has been done for all participants and those for whom the Bankruptcy Act prescribes special service of documents, except in the case of the service for the Financial Agency.
In each court, separately for each debtor, a register of serving documents via the e-Court Notice Board website will be kept in electronic form in the order of publication. The register of documents is public and has to be accessible to interested persons throughout the working hours of the court.
The register of documents will include information on the basis of which the identity of the debtor, the case number, the type of court document and the date of publication of the document on the e-Court Notice Board website can be established.
Documents served to the court by the Financial Agency as a body undertaking actions in accordance with the provisions of the Act through the eSpis information system are authenticated with the electronic seal of the Financial Agency.
Prior proceedings are a non-mandatory (optional) part of bankruptcy proceedings that precede the decision on instituting bankruptcy proceedings and is carried out for the purpose of determining the prerequisites for instituting bankruptcy proceedings.
The court decides on instituting, conducting and closing the bankruptcy proceedings, appoints and supervises the bankruptcy manager and the board of creditors and carries out other activities to ensure that the bankruptcy is conducted in accordance with the law and that the creditors receive payment.
By instituting and conducting bankruptcy proceedings, all of the rights are transferred from the debtor’s bodies (e.g. management board) to the bankruptcy manager and during the bankruptcy proceedings the debtor may either continue or cease to operate.
The board of creditors has the duty to supervise the bankruptcy manager and assist him/her in managing operations and, in addition to other powers, informs the court and creditors on the course of the proceedings and on the status of the bankruptcy estate.
An assembly of creditors decides on a series of issues that are relevant for the conduct and completion of bankruptcy proceedings, such as appointing a new bankruptcy manager, adopting a decision on the continuation of operations, or drafting a bankruptcy plan, and it is in particular entitled to request a report from the bankruptcy manager concerning the state and management of affairs.
The bankruptcy manager represents the debtor and manages its operations in the event of their continuation and has the duty to encash the bankruptcy estate assets in line with the decisions of the assembly of creditors and the board of creditors.
The bankruptcy manager has to act in a conscientious and orderly manner, in particular:
The bankruptcy manager has to submit written reports on the course of the bankruptcy proceedings and on the state of the bankruptcy estate on the prescribed form, at least once every three months.
Written reports referred to in paragraph 2 of the Article and other reports which the bankruptcy manager has to submit pursuant to the Act are published on the website of the e-Court Notice Board without delay.
Creditors submit their claims to the bankruptcy manager within 60 days of the date of publication of the decision. After examining the merits of submitted claims, assets are encashed and thus encashed assets are distributed, i.e. paid to creditors in corresponding percentages according to different payment orders of precedence, i.e. the course of the bankruptcy is carried out according to the accepted bankruptcy plan.
If the creditors fail to make a decision on the further manner and conditions of the sale, the bankruptcy manager will determine the manner and conditions of the sale.
The settlement of creditors is carried out according to the inflow of cash. Distributions are carried out by the bankruptcy manager, and the final distribution commences as soon as bankruptcy estate encashment is complete.
The court will pass a decision on the conclusion of the bankruptcy proceedings immediately after the completion of the final distribution.
The court will serve the decision on the conclusion of bankruptcy proceedings to the debtor’s workers.
With the conclusion of the proceedings and its deletion from the register, the company ceases to exist.
After instituting the bankruptcy proceedings, a bankruptcy plan may be drafted, and it may depart from the statutory provisions on bankruptcy estate encashment and distribution.
The debtor may submit the bankruptcy plan together with the proposal for opening bankruptcy proceedings. After the opening of bankruptcy proceedings, the bankruptcy plan is entitled to be filed with the court by the bankruptcy manager and individual debtor. The bankruptcy plan submitted to the court after the final hearing will not be taken into account.
If at the hearing of the creditor, the bankruptcy manager is ordered to draw up the bankruptcy plan, he has to submit the bankruptcy plan to the court within the time limit specified in the decision of the creditor. The board of creditors, if established, and the individual debtor cooperate with the bankruptcy manager in drafting the bankruptcy plan.
The court will conduct summary bankruptcy proceedings over a legal person if the following prerequisites have been met:
Pre-bankruptcy proceedings are a special type of non-contentious procedure carried out in order to regulate the legal position of the debtor and its relation toward creditors, prevent its insolvency and maintain its activity.
Pre-bankruptcy proceedings may be instituted if the court finds that there is a threat of insolvency. The threat of insolvency, i.e. inability to pay, exists if the court becomes convinced that the debtor will not be able to settle its current liabilities when due.
It will be considered that there is a threat of insolvency if no circumstances have arisen due to which it is deemed that the debtor has become insolvent and:
Pre-bankruptcy proceedings may be carried out over a legal entity and over the assets of an individual debtor (a natural person who is a payer of income tax from independent activities in accordance with the provisions of the Income Tax Act and a natural person who is a payer of profit tax in accordance with the provisions of the Corporate Tax Act).
In pre-bankruptcy proceedings, only the commercial court on the territory of which is the debtor’s registered office located has the real competence and territorial jurisdiction. If the individual debtor has no registered office, a commercial court having real competence and territorial jurisdiction is the one located in the area of the debtor’s permanent residence. If the individual debtor has no permanent residence, a commercial court having real competence and territorial jurisdiction is the one located in the area of the debtor’s temporary residence.
The proposal for instituting pre-bankruptcy proceedings may be filed by the debtor.
Pre-bankruptcy proceedings are urgent. The law stipulates that the pre-bankruptcy proceedings have to be completed within 120 days from the date of instituting the pre-bankruptcy proceedings.
All court documents are served by posting the document on the e-Court Notice Board website, unless otherwise stipulated by the Bankruptcy Act.
Exceptionally, the service of documents between the court and the Financial Agency as a body which takes actions in accordance with the provisions of the Bankruptcy Act, and which acts upon court decisions is done through the eSpis single information system.
The service of documents is deemed to have taken place on the eighth day following the date of publication of the document on the e-Court Notice Board website.
Publication of the document on the e-Court Notice Board website is considered as proof that service of documents has been provided to all participants and those for whom the Bankruptcy Act prescribes special service of documents, except in the case of service of documents to the Financial Agency.
In each court, separately for each debtor, a register of documents served via the e-Court Notice Board website will be kept in electronic form in the order of publication. The register of documents is public and has to be accessible to interested persons during the working hours of the court.
The register of documents will include information on the basis of which the identity of the debtor, the case number, the type of court document and the date of publication of the document on the website of the e-Court Notice Board can be established.
Documents served to the court by the Financial Agency as a body undertaking actions in accordance with the provisions of the Act through the eSpis single information system are authenticated with the electronic seal of the Financial Agency.
The Court has to decide on the proposal for the opening of pre-bankruptcy proceedings within eight days from the date of submission of the complete proposal.
The application for the claim is submitted on the prescribed form to the competent unit of the Financial Agency within 15 days from the date of publication of the decision on the opening of pre-bankruptcy proceedings on the e-Court Notice Board website.
Creditors of the debtor of an individual only declare claims arising from the pursuit of an activity or relating to the pursuit of an activity of that debtor.
The application for a claim may be accompanied by a completed form for voting on a restructuring plan, if the debtor has submitted a restructuring proposal together with the proposal to open pre-bankruptcy proceedings.
Creditors affected by pre-bankruptcy proceedings may exercise their claims against the debtor only in pre-bankruptcy proceedings.
The Financial Agency (FINA) has to, on a prescribed form, create a table of filed claims and a table of disputed claims. The Financial Agency has to publish on the e-Court Notice Board website as follows:
The Financial Agency has to provide the debtor and creditor a full insight into the received documentation before its service to the court.
Creditors are classified into groups on the basis of their claims. Each group of creditors with the voting right votes separately on the reorganization plan.
The rules for classifying participants in the bankruptcy plan correspondingly apply to the classification of creditors in pre-bankruptcy proceedings.
All creditors of the same group are granted the same rights and are settled in proportion to their claim.
It will be considered that the creditors have accepted the restructuring plan if a majority of all the creditors has voted for it and if in each group the sum of claims of the creditors who have voted for the plan exceeds the sum of claims of the creditors who have voted against the plan by double.
If the necessary majority referred to in Article 59 of the Bankruptcy Act has not been reached in a particular group of creditors and all other conditions for the confirmation of the restructuring plan referred to in Article 61 of the same Act have been met, upon the proposal of the debtor or with his consent, that group will be deemed to have accepted the plan and the court will confirm the restructuring plan if the following conditions are met:
Appropriate participation of group creditors in economic benefits within the meaning of paragraph 1 (2) of the Article will be deemed to exist if, according to the restructuring plan:
The right to vote is held by creditors whose claims have been established, creditors who can prove their claims by an enforcement document, unless public or publicly certified document proves the cessation of a claim, a secured creditor for a part of its claim secured by the right to separate settlement which it filed as a creditor, if it is secured by the right to separate settlement registered in a public record, unless the debtor proves the cessation of the claim via public or publicly certified document, and creditors of disputed claims who have been granted the right of vote by agreement.
A confirmed restructuring plan has a legal effect on all its participants. The claim of a creditor who has not declared the claim in pre-bankruptcy proceedings, although informed of its opening, may be satisfied only in a manner, within time limits and under the conditions provided for in the restructuring plan for the claims of the group of creditors to which the creditor concerned would have belonged if he had declared the claim.
Pre-bankruptcy proceedings do not affect as follows:
Institution of pre-bankruptcy proceedings does not affect qualified financial agreements subject to provisions of Article 182, paragraphs 6 and 7 of the Bankruptcy Act.
Claims cannot be subject to a restructuring plan.
The rights of separate creditors (those entitled to a separate settlement of their claims from certain parts of the bankruptcy estate) may be restricted by a restructuring plan and without their consent, but they must not be placed in a worse position than they would have been if the plan had not been in place and insolvency proceedings had been opened.
Creditors who by virtue of an actual or personal right can prove that an item does not belong to the bankruptcy estate, may participate in a restructuring plan only if they explicitly and voluntarily agree to it.
Pre-bankruptcy proceedings does not affect the individual and collective rights of workers deriving from domestic labor law and European Union labor law, such as the following:
– Informing workers of the latest and possible development of the business or plant’s activities and its economic situation, so that they can inform the debtor about the business situation and the need to consider restructuring mechanisms
– Informing workers of any preventive restructuring procedure that could affect employment, payment of salaries and any future payments to workers, including pensions
– Informing and consulting workers in relation to restructuring plans before they are submitted for reception to creditors or for confirmation by a court.
Where the restructuring plan provides for measures that lead to changes in the organization of work or work contracts with workers, those measures are subject to the approval of the workers.
The costs and duration of bankruptcy proceedings, like in any other court proceedings, cannot be specified in advance as they depend on a number of factors relating to the bankruptcy debtor and the procedure itself.
The costs of bankruptcy proceedings include as follows:
In pre-bankruptcy and bankruptcy proceedings, each creditor bears its own costs of proceedings, whereas costs of the court and other bodies in the proceedings, i.e. participants in the proceedings are settled from the sources as provided by law.
The costs of proceedings may be settled from the debtor’s assets. To settle the costs of proceedings, funds that have been collected by encashing the debtor’s assets may be used, as well as funds that have been collected for that purpose prior to instituting the bankruptcy proceedings.
No advance payment is to be paid by:
To settle the cost of bankruptcy proceedings that cannot be settled from the debtor’s assets and advance payment, the Fund for Settlement of the Bankruptcy Proceedings Costs has to be established at every court. The assets of the Fund for Settlement of the Bankruptcy Proceedings Costs are provided from assets obtained as stipulated by law.
Ministry of Justice, Public Administration and Digital Transformation
Ulica grada Vukovara 49, 10 000 Zagreb
Bankruptcy Act (OG 71/15, 104/17, 36/22 and 27/24)
Ordinance on the content and type of forms for submissions in pre-bankruptcy and bankruptcy proceedings (OG 67/19 and 54/22)
Ordinance on the manner of data collection on procedures relating to restructuring, insolvency and discharge of debt (OG 40/22)
Last updated on 28 February 2025