Collection of Claims
Debt Recovery on Behalf and for the Account of the Republic of Serbia
Settling of debts in Serbia, incurred through the banks in bankruptcy, started in 2005, when the Law on Settlement of Relations between the Republic of Serbia and Banks in Bankruptcy on the Grounds of Takeover of Foreign Credits or Loans came into force.
Pursuant to the above Law, the ultimate debtors – legal entities or their legal successors based in the Republic of Serbia – are relieved from their liabilities vis-à-vis banks in bankruptcy or liquidation and take on obligations to the Republic of Serbia in cases when bank in bankruptcy or liquidation is a debtor, i.e. original debtor or guarantor. Deposit Insurance Agency manages the said receivables on behalf and for the account of the Republic of Serbia.
The Privatization Law binds all state creditors to register their claims from the legal entity undergoing restructuring or privatization by public tender or auction as at December 31, 2004. State creditors are bound to write off the debts of the legal entities undergoing privatization and they may recover such claims from the privatization proceeds, by implementing the Contract on Settlement of Claims.
Deposit Insurance Agency also has the status of state creditor when managing claims arising from the assumed liabilities on behalf and for the account of the Republic of Serbia.
In end-December 2005, the Republic of Serbia Government rendered a Decision to adopt the Information on the Republic of Serbia’s claims against debtors, within the DIA responsibilities, along with the proposed manner of settling their relations.
Since the procedures conducted by the Agency (on behalf and for the account of the Republic of Serbia) in the process of recovery of receivables from the debtors in the process of restructuring, privatization or bankruptcy are prescribed by legal provisions, this Decision also settles the relations between the Agency and: i) public companies and ii) the companies privatized in accordance with former regulations. The Decision leaves an option to recover the Republic of Serbia’s claims from the companies of interest to the Republic of Serbia by converting their liabilities into share capital, provided the Government makes separate decisions on each conversion. This Decision authorizes the Deposit Insurance Agency to settle these claims from public companies and the companies privatized in accordance with the former privatization rules on behalf and for the account of the Republic of Serbia.
The Government Decision of July 1, 2004, authorizes the Agency to buy fully provisioned loans from the banks whose state-owned shares are being sold and take all necessary steps to collect them (carve-out).
In 2009, no investors expressed interest in buying the capital of large systems undergoing privatization, characterized by specific product programs and inherited systemic business problems, which have become illiquid and overburdened with debts after losing their markets. The Republic of Serbia has settled the claims from such companies by debt-to-equity swap.