Croatia: paving the way for restructuring

The Directive (EU) 2019/1023 on Restructuring and Insolvency (the Directive) has finally been transposed into Croatian legislation. Implementation has been carried out through extensive amendments to the Insolvency Act (the IA) and partial amendments to the Consumer Insolvency Act (the CIA). Both are in force as of 31 March 2022.

The amendments revolve around fine tuning the restructuring process that was already set out by the IA through the pre-insolvency proceedings while also harmonising it with the Directive.


The primary aim of the amendments relating to the restructuring regime is to harmonise the IA with the acquis communautaire and to follow the general trend of departure from formal insolvency proceedings by opening a window into private regulation. At the same, the amendments are intended to ensure effective, simple and flexible management of the procedure, with precisely defined deadlines and clear consequences of procedural actions.

What to expect in practice?

The nature of the provisions that were introduced suggest that the biggest benefit will be reaped by companies which are well organised, financially stable and have a good business perspective, albeit their progress and development are hurdled by a negative balance sheet.

Focal points - first outline

When can a restructuring process be initiated?

The process can be initiated when there are certain indicators that the debtor will not be able to timely fulfil its outstanding obligations and is under the threat of becoming insolvent. The initiative lies exclusively with the debtor, on whom also rests the burden of proof evidencing the likelihood of insolvency. In case that the debtor is over-indebted or insolvent in the sense of insolvency law, insolvency proceedings should be initiated.

When insolvency or liquidation proceedings are already under way, the restructuring procedure cannot be initiated. Restructuring is not permissible, among other reasons, if two years have not elapsed from the fulfilment of obligations arising from a previous restructuring plan.

Certain debtors (such as government-financed funds, municipalities, financial/credit institutions or natural persons who are not entrepreneurs) are excluded from the restructuring regime set out by the IA.

A novelty introduced by the amendments is that the restructuring process may be carried out against a debtor who has been convicted of a criminal offense of breach of trust in business operations, fraud in business operations, causing bankruptcy, favouring creditors or breach of the obligation to keep trade and business books under the Croatian Criminal Code only if the debtor in question took appropriate measures to address the problems that led to that conviction and informed its creditors of the undertaken measures and their results during restructuring negotiations and provided them with detailed information on the measures taken and their results in the application for initiation of restructuring proceedings.

Which documents are required?

An application for initiation of proceedings is to be submitted to the competent commercial court. The application must be accompanied by annual financial statements (not older than three months), a statement on the number of employees (as at the last day of the month that precedes the day of the application) and a proposal for a restructuring plan (if drafted).

In case a restructuring plan has not been submitted with the application, the debtor must submit the plan no later than twenty-one days after the day on which the decision on acknowledged and disputed creditors' claims has become final and binding.

Additional documentation that may prove useful for restructuring negotiations or which may aid the approval of the restructuring plan is most welcome.

What is a restructuring plan?

The restructuring plan is the foundation for the restructuring process. It provides the basis and outlines the financial and operational measures that will be undertaken, among other actions, for the purpose of the debtor's recovery. Of course, this is all with the consent of the deciding creditors and with the approval of the court.

The amendments to the IA introduced an exhaustive list of mandatory contents that must be included in the restructuring plan, with the aim to speed up the process by precisely covering all relevant aspects of restructuring. However, such an exhaustive list of mandatory contents may prove to be an obstacle to restructuring when it comes to smaller companies and entrepreneurships.

How is the restructuring plan voted on?

Voting on the proposed restructuring plan takes place at the voting hearing that is to be held within 30 days after the decision on acknowledged and disputed claims becomes final and binding. Creditors vote in writing by filling in a prescribed voting form that is to be delivered to the court before the voting hearing commences. If creditors do not deliver the form timely or the voting form is unclear, they will be presumed to have voted for the approval of the restructuring plan.

Creditors are divided into voting classes depending on the nature of their claims. Each formed class votes separately and it is presumed that the restructuring plan is accepted if, in each class, a majority of creditors voted in favor of the plan and the sum of claims of the creditors who voted for the plan exceeds twice the sum of claims of creditors who voted against the plan.

If such majority is not accomplished in a specific class, it is possible for a majority of creditors to override dissenting creditors ('cross-class cram-down'). In that case, the restructuring plan will be presumed as accepted, but this is possible only with the debtor's consent or upon his proposal. Also, the following conditions must be fulfilled: (i) the creditors of the dissenting class are not put in a worse position as a result of the restructuring plan than they would have been if the restructuring plan had not existed, (ii) the creditors of the dissenting class participate appropriately in the economic benefits to be accorded to the participants under the restructuring plan, and (iii) a majority of classes have accepted the restructuring plan by the required majority, provided that at least one of the classes that has accepted the plan must not be a group of shareholders or a class of creditors with lower payment claims within the meaning of the IA.

What effects does the restructuring plan have?

After the restructuring plan is accepted by the creditors and approved by the court, the now approved restructuring plan has legal effect towards all its participants. The claim of a creditor who has not filed his claim in the restructuring proceedings, although duly notified of its opening, may be settled only in the manner, within the time limits and under the conditions provided for in the restructuring plan for the claims of the appropriate class of creditors to which he would have been placed.

A debtor whose obligations have been written off on the basis of an approved restructuring plan shall be obliged to keep the resulting profit until the expiry of the deadline for fulfilling all obligations arising from the restructuring plan.

At the same time, a creditor who, in accordance with an approved restructuring plan, writes off a claim against the debtor, the amount of the written-off claim shall be determined as a tax-deductible expense.

Are (interim) financing arrangements protected?

Yes, to an extent. New financing and interim financing are generally protected. This protection is twofold. In case of subsequent liquidation proceedings: (i) the creditors who provided new financing or interim financing in the restructuring procedure will have a privileged payment priority rank, and (ii) their claims are generally undisputable.

Is there a simplified restructuring procedure?

The IA does not envisage a simplified restructuring procedure.

Restructuring frameworks undergoing change - WT (

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.