Insolvency Law at Kosovo
Kosovo's insolvency framework is primarily governed by Law No. 08/L-256 on Bankruptcy, enacted on July 11, 2024, and published in the Official Gazette on August 6, 2024. This legislation supersedes the previous Law No. 05/L-083, which had been in effect since 2016. The new law introduces significant reforms aimed at enhancing the efficiency, transparency, and fairness of bankruptcy proceedings in Kosovo. (An Expert Review of Recent Updates to the Bankruptcy Law)
Key Features of Kosovo’s Bankruptcy Law
1. Creditor Initiation Rights
Previously, initiating bankruptcy proceedings required at least two creditors. The updated law allows a single creditor to initiate proceedings if the debt exceeds €30,000, simplifying the process and encouraging more creditors to seek legal remedies. (An Expert Review of Recent Updates to the Bankruptcy Law, An Expert Review of Recent Updates to the Bankruptcy Law)
2. Establishment of the Chamber of Bankruptcy Administrators
The law establishes a Chamber of Bankruptcy Administrators, formalizing its status and defining its organizational structure, including reporting procedures and disciplinary measures. This addresses gaps in the previous legal framework, where the absence of a structured body led to inconsistencies and inefficiencies in bankruptcy administration. (An Expert Review of Recent Updates to the Bankruptcy Law)
3. Continuation of Bankruptcy Procedures After Debtor’s Death
A critical update ensures the continuation of bankruptcy procedures in the event of an individual debtor's death. The revised legislation presumes that the rights and obligations of a deceased debtor are inherited by their heirs in accordance with inheritance laws, ensuring the smooth continuation of bankruptcy procedures despite the debtor's death. (An Expert Review of Recent Updates to the Bankruptcy Law)
4. Asset Sale Procedures and Maximization of Value
The updated law specifies the rules for asset sales during liquidation, with a strong emphasis on maximizing value. Public auctions, conducted in line with enforcement procedure provisions, are now mandated to ensure transparency and accountability in asset sales. This update is a significant improvement over previous guidelines, which often resulted in lower returns for creditors. (An Expert Review of Recent Updates to the Bankruptcy Law)
5. Harmonization with the Commercial Court Law
The jurisdiction of courts has been aligned with the Law on the Commercial Court, ensuring consistency and coherence in handling bankruptcy cases. The revised law addresses this by detailing payment procedures for secured creditors and incorporating feedback from World Bank/IFC experts. New rules now allow secured creditors to sell collateral themselves and include compensation mechanisms for delays in asset sales by administrators. (An Expert Review of Recent Updates to the Bankruptcy Law)
6. Clarification of Documentation and Administrative Expenses
The updated legal framework clarifies the documentation required to initiate bankruptcy cases, aligning with the Law on Business Organizations. Previously, incomplete documentation often caused delays. Moreover, the new provisions allow debtors to deposit funds into a trust account to cover administrative expenses if the bankruptcy estate is insufficient, addressing issues related to delayed payments to bankruptcy administrators—a common problem under the old system. (An Expert Review of Recent Updates to the Bankruptcy Law)
7. Final Report and Fees Regulation
The revised law introduces a requirement for administrators to submit final reports, a provision that was previously absent. This change addresses issues of ambiguity and procedural delays. Additionally, the regulation of administrator fees has been revised, removing specifics from the law itself and enabling regulation through by-laws, aligning with practices in other professions. This allows for greater flexibility and responsiveness to changing circumstances. (An Expert Review of Recent Updates to the Bankruptcy Law)
8. Supervision and Disciplinary Measures
The Chamber of Bankruptcy Administrators will be officially established with a mandate derived from the updated legislation, under the supervision of the Ministry of Justice. This move introduces supervision and control mechanisms for bankruptcy practitioners, comparable to those applied to other legal professionals, ensuring uniform standards of accountability and competence. The previous framework lacked such structured oversight, leading to varying standards in the practice of bankruptcy administration. (An Expert Review of Recent Updates to the Bankruptcy Law)
Conclusion
The enactment of Law No. 08/L-256 marks a significant advancement in Kosovo's bankruptcy legislation. By addressing previous challenges and incorporating international best practices, these changes are poised to significantly impact the legal landscape, benefiting creditors, debtors, and the judicial system as a whole. (An Expert Review of Recent Updates to the Bankruptcy Law, An Expert Review of Recent Updates to the Bankruptcy Law)
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