Abstract
Crises in business occur at different levels and in different dimensions, and often cannot be managed without the help of insolvency proceedings and insolvency law. Crisis management in these cases is extremely challenging and risky, although often the last way out of an acute crisis situation. The Slovenian normative regulation and the business and insolvency practices in place give companies that find themselves in an acute crisis and require the protection of the court a limited formal and practical opportunity to successfully manage (remedy) the resulting crisis and thus ensure their survival and further development, but the insolvency procedure alone cannot be successful if the other business conditions are not ensured to be fulfilled. Taking into account the theoretical findings and research results, the chapter additionally concludes that insolvency law in companies (creditors and debtors) is insufficiently known to managers, thus making it practically less useful in crisis resolution procedures.
TopIntroduction
In daily communication, various more or less expert studies, and institutional, entrepreneurial and other organisational materials, one often finds references to natural disasters, various conflicts, epidemics, major or minor difficulties of institutions and companies or even their forced changes and dissolutions, the worrying decline in the performance of individual industries or services and even countries, and overt or covert problems of individuals and large or small communities, which are in some way or another associated with the concept of crisis. Namely, the word crisis is a rather frequently used description for uncertain, difficult, dangerous and future-defining situations, as it relates to an extremely wide range of natural, social, economic, health and mental processes and conditions (e.g. political crisis, economic crisis, financial crisis, oil crisis, environmental crisis, moral crisis, art crisis, crisis of values, health or epidemiological crisis, midlife crisis etc.). In everyday language, the crisis mostly has a prevalent negative connotation, as it is associated with a wide variety of inconveniences, difficulties, stressful situations, and threats. Particularly in recent times, this term and concept has become “popular” in daily communication since the second half of 2008, when practically the whole world was hit first by the financial crisis (financial sector problems and drastic fall in the value of investments), followed by the economic crisis (problems of the real economy), and then, in the first half of 2020, when the Covid-19 pandemic crisis occurred. Crises occur at different levels and in different dimensions, and corporate crises often cannot be managed without the help of insolvency proceedings and insolvency law, which must be well understood not only by the active participants in the insolvency process, but also by the managers of the distressed company on the one hand and the managers of the creditor company on the other.
In this chapter the focus is on the Slovenian normative regulation and the business and insolvency practice, and the authors address the questions (a) whether companies in acute crisis that require the protection of a court have sufficient formal and practical options under the current insolvency law to successfully manage (remedy) the crisis and thus ensure their survival and future development, (b) whether the opening of insolvency proceedings is sufficient to ensure that the causes of the crisis are addressed, and (c) whether corporate insolvency law is sufficiently familiar to managers to be of practical use in crisis resolution procedures.
Key Terms in this Chapter
Insolvency Proceedings: Often the last resort from an acute crisis involving competent national courts, is the presence of a special insolvency law.
Crisis: A short-lived, undesirable, and critical situation in a company (organisation), which directly threatens the achievement of the objectives of the participants of this company and its continued existence and development, which is due to the intertwined and simultaneous operation of both external and internal causes.
Conditions for Successful Recovery: In addition to the insolvency procedure, a healthy business core, a capable crisis management, available financial resources, and a positive attitude of the employees.
Insolvency (According to the Slovenian Law): In a reasonably analogue way is a situation that arises when the debtor (a) within an extended period of time is not able to settle all their liabilities falling due within such period of time (continuous insolvency), or (b) becomes insolvent in the long-term because they have insufficient assets to repay all debts.
Business Rescue Rate: The proportion of companies that, through insolvency proceedings, ensure their continued survival and development with at least industry-average profit margins, growth in shareholder value and adequate competitive market positioning.
ZFPPIPP: Slovenian Financial Operations, Insolvency Proceedings, and Compulsory Dissolution Act.
Reorganisation: The process of healing a company and managing a crisis, the purpose of which is to remedy an unfavourable and future-threatening crisis situation by preventing further deterioration of the business and restoring conditions that will ensure the company's continued existence and development.
Insolvency Law: In addition to regulating bankruptcy proceedings, it also includes provisions to prevent the debtor from being wound up, to prevent the sale of the company's assets, to relieve debts, and to provide the possibility of a fresh start.