At the panel titled ‘New Law in Practice’ at Lider’s conference on the implementation of the new Financial Operations Act, several experts from the sector spoke.
Infokorpa consultant Danko Sučević discussed the factors of company restructuring. He emphasized the illiquidity of companies as the biggest problem, referring to those blocked for more than a year as ‘dead’ companies.
He claims that the focus should be on about 3000 companies to which the new law generally applies. Preliminary sustainability analysis leads to final factors. Sučević also emphasized that it is not enough to simply write off debt and instead take ownership of a company. – That company will fall back into the same problems because liquidity and solvency are not enough for a firm to survive in the long term. The fact is that only 20 percent of companies (out of those mentioned 3000), that is, 600, exit the crisis. In 2011, as many as 41,000 companies operated at a loss while as many as 25,000 did not even submit a financial report – said Sučević. He also highlighted the significant problem of not initiating bankruptcies when it was time.
– We did not initiate bankruptcies for the simple reason that they were unprofitable for us. The cost of initiating bankruptcy was greater than any potential profit we would have made from it. Precisely because the tax administration did not initiate bankruptcy when it should have, we now have a liquidity problem – said Sučević.
He identified key success factors as a healthy core of the company, for which it is crucial to have a positive cash flow that does not necessarily mean profit. The core itself must be protected from the negative consequences of business operations, and marketing should be focused on it.
– The fact is that growth does not equate to exiting the crisis. Quite the opposite! When you are in a crisis, growth is an illusion because growth requires money, which you do not have, and management time, which they also do not have – warned the Infokorpa consultant.
The second factor he mentions is the need for a long-term source of financing. He adds that it is more profitable for owners and suppliers to give money than not to give it, as pushing a company into bankruptcy results in losses at all levels, from the value of real estate to intangible assets and other segments.
The third factor is management, which is newly appointed in 70 percent of cases. New management, Sučević believes, reduces the chances of the company’s success but can have many positive effects. The last factor represents a positive attitude and motivation of employees because, in a crisis, money and mutual communication, which is precisely the job of management, are the most important.
– It is important for employees that management has a realistic attitude towards the situation that has arisen but also a created plan on how to exit the crisis – he concluded.
Regarding the position of creditors in pre-bankruptcy settlements, lawyer Damir Barišić spoke, explaining the legal aspects of it and the way to differentiate participants in such a process. The pre-bankruptcy settlement procedure consists of an administrative phase and a judicial phase. The procedure is conducted according to the rules of the General Administrative Procedure Act (ZUP).
– Who are the parties? The debtor and the creditor. The position of the creditor as a party is not sufficiently regulated or protected in the administrative procedure. The procedure thus ends with the adoption of an administrative act but only when the procedure ends with a suspension – says Barišić. He also cites the record as an important item because it is proof of the course and content of the actions of the procedures and the statements given. He distinguishes between two types of creditors: secured and unsecured creditors. The latter have the right to separate satisfaction by seizing things, while secured creditors have the right to return things from their value. The right to appeal is also important, which exists only if the claim is disputed, about which the Ministry of Finance decides, an independent service for second-instance administrative procedures. Barišić considers this inadequately regulated by the new law.
From the auditing company Hodicon, Branko Tomašković spoke about the importance of the code of ethics for professional accountants. The principle of professional ethics requires that auditors in their work and behavior must adhere to certain rules of conduct to protect the profession from the behavior of individual auditors who could undermine the dignity of the profession with their inappropriate actions.
Restructuring advisor Igor Benaković spoke about the practical part of writing a restructuring program, where extremes range from complete trivialization to excessive complication. As the root of the problem, Benaković sees the failure to meet obligations on time, which necessarily leads to the question: is it even worth working if we do not have the assurance that we will be paid? He cites the management of companies as responsible, but also the supervisors.
– I see this law as the last train to try to save things. An entrepreneur should not do restructuring just because the law requires it. He should take care to make his business healthy – said Benaković.
He added that every restructuring program must contain three components: financial restructuring, which includes liquidity management and restructuring of the balance sheet itself. Then there is operational-organizational restructuring or so-called business restructuring, which relates to overall business processes within companies. The last is strategic restructuring, which is often overlooked, although it is necessary for the long-term sustainability of the business. As a concrete example, he cited experiences from the restructuring of the company Badel 1862. He noted the necessity of changing management. He also mentioned the need for transparency towards banks and financial institutions and the need for intensive communication with the relevant authorities. Additionally, constant and active negotiations and the utilization of all internal resources – from knowledge to assets and other capacities – are required. However, the most important are persistence and determination because only through long-term investments, ethics, and expertise, Benaković believes, can one achieve a successful outcome.
