Prearranged Reorganization Plans in Serbia: Form Over Substance

Abstract

Similar to other countries, Serbia has established an expedited corporate restructuring framework introducing prearranged reorganization plans in the Law on Bankruptcy. New procedure has been widely used since the law came into effect, but with mostly dismal results. The reason for the widespread use lies in the fact that this procedure incorporates all key components of a hybrid procedure-debtor in possession, a moratorium and the possibility to impose the plan on dissenting creditors within the class. As a rule, prearranged reorganization plans are not feasible. Debtors' owners in Serbia are unwilling to give up their equity and despite being unfeasible, creditors tend to support these plans as they are not willing to accept debt write-offs and/or debt-to equity swaps. This article examines the deficiencies of the procedure and suggests further reforms.