Bankruptcy Proceedings in Serbia: A Guide for Creditors and Debtors

Bankruptcy proceedings in Serbia provide a legal framework for addressing a company’s insolvency, protecting creditors’ rights and determining whether the debtor’s assets should be liquidated or its business reorganised.

Unlike solvent liquidation, which may be carried out when a company has sufficient assets to meet all its obligations, bankruptcy proceedings require the existence of at least one statutory ground under Serbian law.

Under the Serbian Law on Bankruptcy, bankruptcy proceedings may be conducted through two principal methods:

1. Bankruptcy liquidation – creditors are satisfied through the sale of the debtor’s assets or the debtor as a legal entity.
2. Reorganisation – creditors are satisfied in accordance with an approved reorganisation plan, which may allow the debtor to continue operating under revised financial and legal arrangements.

The principal objective of bankruptcy proceedings is to achieve the most favourable collective settlement of creditors by maximising the value obtained from the debtor or its assets.

Bankruptcy liquidation generally results in the winding up of the debtor’s business. However, Serbian law also permits the sale of the debtor as a legal entity, allowing that entity to continue operating under new ownership.

Reorganisation, by contrast, provides an opportunity to address financial difficulties through a legally binding plan while preserving the business where economically justified.

The appropriate approach depends on the debtor’s financial position, the value of its assets, the interests of creditors and the feasibility of continued operations.

When Can Bankruptcy Proceedings Be Opened in Serbia?

Under Article 11 of the Serbian Law on Bankruptcy, bankruptcy proceedings may be opened when at least one of the following statutory grounds exists:

• Permanent inability to pay;
• Imminent inability to pay;
• Over-indebtedness;
• Failure to comply with an adopted reorganisation plan, or where the plan was obtained through fraud or unlawful conduct.

Permanent Inability to Pay

Permanent inability to pay exists where the debtor:

• Is unable to meet its monetary obligations within 45 days after they become due; or
• Has completely suspended all payments for 30 consecutive days.

Under Article 12 of the Law on Bankruptcy, permanent inability to pay is presumed where a creditor has been unable to recover its monetary claim through judicial or tax enforcement proceedings conducted in Serbia.

Imminent Inability to Pay

Imminent inability to pay exists where the debtor demonstrates that it is likely to be unable to meet its existing monetary obligations when they become due.

This ground allows financial difficulties to be addressed before the debtor has necessarily defaulted on its obligations.

Over-Indebtedness

Over-indebtedness exists where the debtor’s liabilities exceed the value of its assets.

An exception applies to partnerships and limited partnerships where at least one partner with unlimited liability is a natural person, as provided by the Law on Bankruptcy.

Failure to Comply with a Reorganisation Plan

Bankruptcy proceedings may also be opened where the debtor fails to comply with an adopted reorganisation plan, acts contrary to the plan in a manner that materially jeopardises its implementation, or where the plan was obtained fraudulently or unlawfully.

These statutory grounds must be assessed individually. Financial difficulties alone do not automatically establish that the legal requirements for opening bankruptcy proceedings have been satisfied.

Key Participants in Bankruptcy Proceedings

Bankruptcy proceedings in Serbia involve several bodies with distinct responsibilities:

• Bankruptcy Judge – supervises the judicial procedure and makes decisions within the court’s statutory authority.
• Bankruptcy Administrator – administers the bankruptcy estate, examines claims and manages the realisation of assets.
• Creditors’ Assembly – enables bankruptcy creditors to participate in decisions concerning the proceedings.
• Creditors’ Committee – represents creditors’ interests and exercises supervisory and other powers prescribed by law.

Understanding the respective powers of these bodies is important for both creditors and debtors.

Rights of Creditors in Bankruptcy Proceedings

Creditors have an interest in ensuring that their claims are properly recognised, classified and satisfied in accordance with the applicable statutory priorities.

The Creditors’ Assembly is formed at the first creditors’ hearing. Voting rights are generally exercised in proportion to the amount of creditors’ claims, subject to the rules governing participation and voting.

Most decisions of the Creditors’ Assembly are made by a majority of the votes of creditors present, while certain decisions are subject to specific statutory requirements.

For example, a decision to proceed immediately with bankruptcy liquidation at the first creditors’ hearing requires the support of creditors whose claims are assessed as representing more than 50% of the total claims of bankruptcy creditors.

The Creditors’ Committee is generally elected at the first creditors’ hearing. Where there are no more than five bankruptcy creditors, the law provides for all of them to serve as committee members.

Filing and Protecting Creditors’ Claims

One of the most important steps for a creditor is filing its claim with the competent court within the applicable statutory deadline.

The court’s decision opening bankruptcy proceedings specifies the period for filing claims. Under the general Law on Bankruptcy, the prescribed period is between 30 and 120 days from publication of the opening notice in the Official Gazette of the Republic of Serbia.

Claims filed after the statutory 120-day limit are dismissed as late.

Creditors should therefore act promptly to establish their legal position and prepare the necessary documentation.

Legal assistance may include:

• Reviewing contracts, invoices, judgments and other documents supporting the claim.
• Preparing and filing claims, including principal, interest and available security.
• Determining whether the claim is secured or unsecured and assessing its priority.
• Representing creditors before the bankruptcy court and in creditors’ bodies.
• Challenging disputed claims or relevant transactions where legally justified.
• Assessing recovery prospects and available procedural remedies.

Where a claim is disputed in full, failure to initiate the required litigation within the statutory deadline and notify the bankruptcy administrator may result in the loss of the creditor’s status in the proceedings.

The timely exercise of these rights is essential to preserving available recovery options.

The Position of the Debtor in Bankruptcy Proceedings

For companies facing serious financial difficulties, early assessment of available legal and financial options is particularly important.

Before bankruptcy proceedings are opened, the debtor may consider negotiations with creditors, refinancing, debt restructuring or other measures intended to restore financial stability.

Where bankruptcy cannot be avoided, the central question is whether liquidation or reorganisation offers a more favourable outcome for creditors.

Reorganisation may be appropriate where the business remains economically viable and an achievable plan can provide better creditor recovery than bankruptcy liquidation.

However, reorganisation is not necessarily the preferable solution in every case. Its feasibility depends on reliable financial projections, the debtor’s operational capacity and the proposed treatment of creditors.

Reorganisation Proceedings in Serbia

Reorganisation is conducted under a written plan that establishes how the debtor’s obligations will be addressed.

A reorganisation plan may provide for measures such as:

• Rescheduling or restructuring existing liabilities.
• Partial settlement of creditors’ claims.
• Sale of assets or business operations.
• Changes to the debtor’s corporate structure.
• Other lawful financial or organisational measures necessary to implement the plan.

The plan must contain the information required by the Law on Bankruptcy, including the classification of creditors, proposed settlement arrangements, implementation measures, deadlines and relevant financial projections.

Creditors vote on the proposed plan in accordance with the statutory rules governing their respective classes.

A reorganisation plan is adopted when the legally required majorities are achieved in all classes entitled to vote and the other statutory requirements are satisfied.

Once the court’s decision confirming the plan becomes final, the plan regulates the relevant rights and obligations of the debtor and creditors in accordance with its terms.

Pre-Packaged Reorganisation Plan (UPPR)

Serbian law also provides for a pre-packaged reorganisation plan, commonly referred to as UPPR (unapred pripremljen plan reorganizacije).

A pre-packaged plan is submitted together with the debtor’s petition for the opening of bankruptcy proceedings and is subject to a specific judicial procedure.

This mechanism enables the debtor to propose a restructuring arrangement before ordinary bankruptcy proceedings are opened.

A properly prepared UPPR requires detailed consideration of the debtor’s financial position, creditors’ claims, proposed repayment arrangements, financial projections and the statutory documentation.

The feasibility of the proposed measures is particularly important. An unrealistic plan may fail to obtain creditor approval or may prove impossible to implement.

For creditors, careful examination of the plan is necessary to determine whether the proposed settlement offers a more favourable outcome than liquidation.

Professional Legal Support in Bankruptcy Proceedings

Bankruptcy proceedings involve legal, financial and procedural issues that can materially affect the interests of creditors, debtors and other stakeholders.

For creditors, legal representation focuses on establishing and protecting claims, participating in the proceedings and identifying available recovery options.

For debtors, legal assistance may involve assessing insolvency risks, evaluating restructuring alternatives, negotiating with creditors and preparing or implementing a reorganisation plan.

Depending on the circumstances, bankruptcy-related legal work may also include litigation concerning disputed claims, avoidance of transactions and the acquisition of assets from bankruptcy estates.

When Should You Consult a Bankruptcy Lawyer in Serbia?

The appropriate time to seek legal advice depends on your position.

For creditors, legal advice should generally be sought as soon as there are indications of the debtor’s insolvency, and particularly upon learning that bankruptcy proceedings have been opened. Filing deadlines and other procedural requirements can directly affect the creditor’s ability to participate and recover its claim.

For debtors, legal advice should ideally be obtained at the first signs of serious financial difficulties, before available restructuring options become limited.

Early legal assessment can help identify the relevant statutory requirements, potential risks and the most appropriate procedural strategy.

Petrović Mojsić & Partners advises domestic and international clients on bankruptcy and insolvency matters in Serbia, including creditor representation, claims, restructuring, reorganisation and related litigation.

For further information about our legal assistance, visit our Bankruptcy and Insolvency Law Services in Serbia.

Note: Bankruptcy proceedings involving banks and insurance companies are governed by a separate statutory framework, with the general Law on Bankruptcy applying only where the special legislation permits.

Damir Petrović, Attorney at Law