Debtors halt entrepreneurs’ businesses - It is certain that 80% of SMEs will not recover their outstanding debts, not even after changes to the Law on privatization

With the intervention of the Government which on Tuesday (May 6, 2014) adopted changes and amendments of the existing Law on privatization, restructuring companies will be protected from forced payment of trustees in the next five months. However, while the state and state-owned companies will continue to protect companies for debts emerged before 2008, private trustees will, when the proposal is adopted, be able to ask for and get funds the restructuring companies owe them. Private trustees will be enabled to continue with court procedures which were halted as well as to initiate new court proceedings which they were not allowed to run due to legal ban.

At first moment, entrepreneurs were happy for the news but they are still skeptical for a reason. Due to new procedure they will also have to waits for their claims at least 150 says so even this kind of a decision of the Government could endanger their business.

Milan Knezevic, the President of the Chamber of small and medium-sized enterprises and entrepreneurs thinks that it would be immoral that small and medium-sized companies credit firms in restructuring due to inability to sue them but that the collection of debts will be very difficult even now.

- Court procedures will last longer due to restructuring process, a part of companies will undergo liquidation and one part of smaller companies went bankrupt and did not recover its outstanding debts. These are all the reasons why it is not realistic that SMEs will collect them now.

In his interview for eKapija, Knezevic says it is necessary to generate an act which would govern that private trustees would have priority upon recovery outstanding debts so that companies in restructuring, the moment they submit them an invoice, are obliged to recover outstanding debts.

A collocutor of eKapija warns that companies in restructuring (and they are already) will drag a large number of SMEs which, due to inability to recover outstanding debts, will be forced to halt business.

Failure of the small companies

Ljiljana Stanojevic, owner of Valjevo-based company Stanojevic which deals with metal processing for more than two decades, has been doing business with Ikarbus and IMT for years. These two companies now owe her RSD 1, 4 mil. She has not recovered outstanding debts yet and is experiencing serious business difficulties.

Her experience tells our collocutor she should be skeptical that the Law on privatization could significantly change things.

- We only want our money to return so that we could continue working and would not fail together with the, We would like and we hope something will change but I am not sure about that. We know the state does not have funds but there are ways to solve problems. The recovery of outstanding debts from the companies undergoing restructuring has been delayed for years so why the state could not prolong deadlines to us for taxes and contributions payment. We would accept even that our claims are paid in bonds so that this way we could pay our obligations to the state.

This suggestion grew into a serious Initiative of the Association of business women Stanojevic is a member of, which thinks that companies in restructuring which have a chance to survive should be saved but not at the price of SMEs.

Bonds settle debt

Namely, one of the proposals of the state for solving these problems would be that trustees get a stake in capital in the restructuring companies but entrepreneurs point out that debts these companies have exceed to a large extent their capital. The Association of business women, based on the suggestion of its members who claim for debts, submitted a proposal of the amendment to the Law on privatization related to conversion of debt claims of entrepreneurs to state-owned companies in restructuring into bonds not in capital as the proposal to the law implies.

Gordana Djurdjevic, the President of the Board for public advocacy of the Association of business women, says that urgent amendments of the Law on privatization were adopted to avoid legal insecurity of trustees and that it is good but that the state should equally treat companies in restructuring and their trustees, SMEs.

Bonds would, as Djurdjevic points out, increase the trade liquidity level and this kind of proposal does not influence position of restructuring companies and they can be restructured to the extent needed.

Exact debt amount unknown

Companies in restructuring accumulated a debt of EUR 1, 5 mil only to state trustees. Debt to private trustees is lower but there is no precise information how much companies in restructuring own to trade.

It is estimated that, the state in providing the support to companies in restructuring to survive, has spent EUR 4 mil so far.

For the Proposal of changes and amendments to the Law on privatization

Ivana Bezarevic