The Financial Operations and Pre-Bankruptcy Settlement Bill provides for the most effective ways of dealing with the problem of illiquidity and insolvency, Finance Minister Slavko Linic said while presenting the bill in Parliament on Thursday.
Linic said that illiquidity was the biggest problem of the Croatian economy as companies could not ask for loans to maintain their production or launch new investment projects. At the end of August, there were 44 billion kuna of unpaid liabilities as a result of illiquidity, he added.
Frozen accounts and outstanding liabilities account for 90% of the money supply, which threatens the healthy part of the economy as well, Linic said, adding that the accounts of 73,000 businesses are now blocked.
About 16,000 enterprises have had their accounts blocked for less than 360 days (with HRK 7 billion frozen in their accounts), and 56,000 for over 360 days (with HRK 36 billion frozen).
A total of 38,676 enterprises with frozen accounts employ 41,000 workers and about 34,000 small businesses employ about 25,000 workers. Linic said that the government would focus on rescuing the companies where about 41,000 people were employed.
Linic said that 526 enterprises each employ between six to 10 workers, 450 between 11 to 50 workers, 48 between 51 and 100 workers, 38 between 101 and 500 workers, while only two companies employ over 2,000 workers each. About 1,000 small business have more than four employees.
"With this proposal it is possible to find a solution for about 1,100 legal entities and 1,000 small business, and our priority is to find a solution for the employees of these legal entities," Linic said.
He said that the government had opted for administrative rather than bankruptcy proceedings in dealing with illiquidity because in that way it would be possible to deal with accumulated problems in the economy faster. He added that the illiquidity problem could be eliminated already in the first half of next year.
Linic said that the main purpose of the law was to make it possible for indebted enterprises to financially restructure their obligations in accordance with their capital and their economic activity, and at the same time increase the chances of creditors collecting their claims.
The bill provides for a deadline of 60 days for companies to make their payments, and if they fail to do so, pre-bankruptcy settlement proceedings are initiated. If a debtor and a creditor fail to reach agreement in a timely fashion, or if recovery is unlikely, a bankruptcy proceeding is instituted automatically.
