Overview

The expression "chapter 11" is known to us from US insolvency law.

Chapter 11 of the United States Bankruptcy Code provides for the reorganisation of a corporation or a partnership, whereby a debtor usually proposes a plan for reorganisation to keep its business alive and pay creditors over time. About one-fifth of all insolvency proceedings in the US are conducted under this chapter, offering economically more efficient solutions also for the creditors.

Slovakia, as a rare example in Europe, has in recent years introduced a similar scheme for its entrepreneurs in trouble.

Under the Bankruptcy and Restructuring Act (Act No. 7/2005 Coll.) insolvent or excessively indebted companies may conclude an agreement with their creditors regarding debt settlement (a restructuring plan). This is instead of entering into bankruptcy, which would result in the sale of their assets and termination of their activities (and also, presumably, in a much lower level of creditor satisfaction). The alternative offered by restructuring is to continue the debtor’s business activities and stabilise its economic and financial situation through curative measures.

This occurs under the supervision of the trustee, the court and the creditors. Thanks to regained productivity, the debtor can eventually settle a higher proportion of its debts.