MONTENEGRO – The bill amending the bankruptcy law

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The government of Montenegro has promulgated a bill amending the bankruptcy law, with the aim of making bankruptcy procedures more efficient and simpler, but it also proposes important changes to the provisions governing the appointment and status of bankruptcy administrators.

  1. Changes to the institute of a bankruptcy administrator

From provisions aimed at giving more sovereignty over decisions taken in the context of bankruptcy proceedings to changing conditions for becoming bankruptcy administrator, the amending bill has devoted great attention to this institute. Amendments concerning the rules for the appointment of the bankruptcy administrator, his status throughout the bankruptcy proceedings and the relationship with the College of Creditors (“BdC“) are included. A bankruptcy administrator must obtain a license after passing an exam and fulfilling a set of conditions, including registration in the Register of Chartered Bankruptcy Administrators. Bankruptcy creditors and debtors will have the right to apply an appeal against the judge’s decision appointing a bankruptcy administrator.

  1. Establishment of a register of bankrupt entities

An important addition to the Amendments Bill is the creation of a bankruptcy estate register (“RBE“) which would contain information on the bankruptcy estate, as well as monitor and update changes to the recorded information. The RBE would be accessible to the public and placed under the authority of the Central Register of Business Entities.

Information on the bankruptcy estate will be entered in the RBE once the bankruptcy proceedings have been completed and most of the bankruptcy estate has been collected, but proceedings are underway regarding the bankruptcy estate. In this case, when adopting a Decision to close the bankruptcy proceedings, the judge-commissioner transmits the Decision to the Central Register of Commercial Entities.

  1. Clarifications of provisions which have been interpreted differently in the past

Proposal to amend Article 13 of the Bankruptcy Law (“Official Gazette of Montenegro ”no. 001/11, 053/16, 032/18, 062/18) (“Bankruptcy law”) Offers a much needed clarification to an article which has been interpreted differently in practice. Under the Amendments Bill, section 13 of the Bankruptcy Act is subject to amendment and the part “on all means of executionWill be deleted from the current wording, thus providing that the presumption of cause of bankruptcy would exist within 45 days of the debtor’s inability to settle his claim in the enforcement proceedings, regardless of the means of execution.

Another amendment to clarify a current provision of the Bankruptcy Law provides that Article 168 (6) now contains wording that “the date of commencement of the restructuring plan is considered to be the validity date of the decision suspending the insolvency proceedings”. The previous wording did not specifically define whether the date of entry into force should be regarded as the date of adoption of the decision or its subsequent validity, which led to different interpretations in practice.

  1. Efforts to make the procedure more efficient

A novelty concerning the BoC allows that in the event of obstruction and harmful acts committed by one of the members of the BoC, the judge can, at the request of the majority of the members of the BoC, dismiss the member obstructing his job. Until now, the right of revocation was reserved only for the BoC. If the current wording of the amendment bill is adopted, Article 46 would not be clear whether the BoC or the creditors’ meeting decides on the appointment of a new BoC member.

In addition, it is expected that the party that proposed the reorganization plan is required to cover the costs of the plan within 60 (sixty) days from the date of validity of the decision to adopt the reorganization plan, otherwise it is considered if the plan has not been adopted and the proceedings are continued as bankruptcy proceedings. The amending bill also does not specify whether a bankruptcy decision is to be passed here, since section 133 of the bankruptcy law governing the causes of that decision has not been amended to include this situation.

Creditors who have not registered their claim on time and those who are not included in the Reorganization Plan even if their claim arises before the adoption of the Reorganization Plan, are prohibited from initiating a reorganization procedure. forced execution to settle their debts. This is to allow the recovery plan to succeed without hindrance, as well as indirectly sanctioning all creditors who do not meet the deadline defined for the registration of their claims.

  1. Other notable changes that we consider problematic

Status of fiduciary creditors

Although fiduciary creditors were not recognized under bankruptcy law, in practice they were considered other secured creditors. The draft amendment bill explicitly defines the status of the fiduciary creditor equaling its position with that of the pledgee. In addition, the amendment bill provides that the rights provided for in the agreement on the fiduciary transfer of property are invalid after the opening of bankruptcy proceedings.

We understand from the reasoning of the Amendments Bill that the intention of this provision was to disable the exercise of fiduciary rights outside the bankruptcy process, but the wording of this provision is not aligned with this intention and may be interpreted in a way that would be harmful to fiduciary creditors, for example in the event of a stay of bankruptcy proceedings. We hope that this provision will be amended before the adoption of the amending bill.

Deadline for secured creditors to report claims

The draft amendment bill introduces the obligation for secured creditors to declare their claims in the same way as bankruptcy creditors. According to the reasoning of the Amendments Bill, the failure of secured creditors to declare the claim within the prescribed time frame would result in the dismissal of the claim.

Until now, the practice has been that, if the secured creditor does not act within the time limits set by the bankruptcy law, he can only lose the part of the unsecured claim as long as his claim remains valid up to the amount of the amount of the guarantee. In our opinion, this interpretation is correct. For example, like the provision on the limitation period for claims under Article 377 of the Contracts and Torts Act, upon expiration of the limitation period, the obligee whose claim is secured by pledge or mortgage can only be settled from the object of security.

Changing the current practice can lead to serious debtor abuse which can trigger bankruptcy proceedings, hoping that the bankruptcy process will go unnoticed by secured creditors who are often the creditors with the largest claims.

  1. Transitional provisions

The transitional provisions provide that the RBE will be constituted within 3 (three) months of the entry into force, and the statutes will be adopted within 2 (two) months.

The bankruptcy proceedings which started in accordance with the old bankruptcy law but in which the main division decision was not adopted, are continued in accordance with the amending bill.


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