Agrokor: The Commercial Court Confirms the Settlement

On Friday, Judge Nevenka Siladi Rstić of the Commercial Court in Zagreb confirmed the settlement accepted by creditors in the extraordinary administration proceedings over Agrokor and determined that the supervision of the fulfillment and implementation of the settlement will be conducted by the court, the extraordinary commissioner, and the temporary creditors’ council.

The Commercial Court’s ruling states that “the settlement accepted by the creditors in the extraordinary administration proceedings over Agrokor and its dependent and affiliated companies is confirmed, at the voting hearing on the settlement held on July 4.”

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The ruling also establishes supervision over the fulfillment and implementation of the settlement. “The supervision will be conducted by the court, the extraordinary commissioner, and the temporary creditors’ council. The extraordinary commissioner is obliged to report to the court and the council once a year on the fulfillment of the settlement,” the ruling stipulates.

It is also stated that “the extraordinary administration proceedings conclude with the implementation of the settlement and that the settlement has legal effect from the date of the ruling confirming the settlement for all creditors, including those who did not participate in the proceedings as well as those who participated, and whose disputed claims are subsequently determined.”

An appeal against today’s ruling of the Commercial Court in Zagreb is allowed within eight days from the date of receipt of the ruling. Delivery is considered completed after the expiration of eight days from the date of publication of the ruling on the e-bulletin board. The High Commercial Court decides on the appeal.

In the reasoning of the ruling, which includes tables showing how individual creditors voted and spans about 60 pages, it is noted that the total claims of creditors with voting rights amounted to 33.76 billion kuna, creditors with claims amounting to 27.08 billion kuna or 80.2 percent of creditors with voting rights voted for the settlement, while creditors with claims amounting to 4.7 billion kuna voted against it.

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The court also emphasizes that the unfulfilled claims of creditors were taken into account, “as it would be unfair for creditors with fulfilled claims to entirely and partially decide on the fate of unfulfilled claims.”

In the reasoning of the ruling, Judge Siladi Rstić explains why the court believes that the temporary creditors’ council had the authority to participate on behalf of the creditors in drafting and preparing the settlement and giving consent to the extraordinary commissioner on the final text of the settlement.

The reason why creditors failed to elect their member for each individual group and why the (permanent) creditors’ council was not established, the court sees in two key determining facts – in the manner of electing members of the creditors’ council and in the short duration of the extraordinary administration proceedings in the phase of proposing creditor settlements through the settlement (12 plus three months). Namely, the specified period is too short for the creditors’ council to be formed or established in the manner prescribed for its establishment by the cogent provision of Article 30 of the Act on Extraordinary Administration, it is explained in the ruling, recalling that due to subsequently “found” companies that are dependent and affiliated with Agrokor, the proceedings should have been supplemented with those companies and their creditors should have received the same rights and powers to submit and determine claims.

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Therefore, the first ruling on established and disputed claims could only be made on January 15, 2018, thus fulfilling the legal condition that the extraordinary commissioner can invite creditors to inform him and the court about the members of the creditors’ council within a month. The deadline expired on March 2, 2018, and three out of five groups failed to elect their member of the creditors’ council, the judge recalls.

She also notes that the permanent creditors’ council is elected by a simple majority of all creditors of the same group, and if a group does not appoint it within 90 days from the date of publication of the call for appointment, the court will appoint it at the proposal of the extraordinary commissioner within an additional period of eight days.

Judge Siladi Rstić points out that according to the provisions of the Act on Extraordinary Administration when appointing the permanent creditors’ council, “it refers to ‘heads’, not to the claims of creditors, which means that if a group, for example, consists of 2000 creditors, it is necessary for 1001 creditors to vote for the same elected member of the creditors’ council, which is practically impossible to achieve.”

She also recalls that the High Commercial Court, by ruling of April 5, which was delivered to the Commercial Court in Zagreb on April 27, 2018, and published on the same day, annulled the classification into groups and the number of members of the permanent creditors’ council originally proposed by the extraordinary commissioner. Thus, “there remained too short a period from the date of publication of the second-instance decision and the duration of the extraordinary administration proceedings until the phase of the proposal of the settlement to creditors (until July 10, 2018) to conduct again the complex and lengthy procedure of electing members of the creditors’ council” as only two months remained until the end of the extraordinary administration proceedings, i.e., until July 10, which is shorter than the legal period of 90 days for the election of members of the permanent creditors’ council.

Therefore, it remained for the temporary creditors’ council to operate, which under the Act on Extraordinary Administration has the powers, obligations, and rights as the creditors’ council, it is stated among other things in the reasoning of the ruling of the Commercial Court in Zagreb.