Under conditions of the global financial crisis increases the risk of debt uncollectability. The risk of this type primarily depends on the individual claims, payment terms, economic and political conditions in the country, as well as the solvency and creditworthiness of the debtor.
The occurence of the debtor’s inability to fulfill its financial obligations due to blockage of business accounts is one of the biggest risks, whose implementation may result in a debtor’s bankruptcy, but in some cases may represent a cause of the creditor’s bankruptcy.
Answers on some questions, concerning with the possibility of the collection of receivables from a debtor who has in the blockade you can find in this article.
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Legal consequences of a blocked accounts are regulated by the Law on performing payment of legal persons, entrepreneurs and natural persons who do not perform activities.
By the Article 5, paragraph 2 of the Law on performance of the payment of legal persons, entrepreneurs and natural persons who do not perform activities has been prescribed the prohibition to the debtor blocked to settle their financial obligations in any way, including the conclusion of various contracts, which shall change a creditor or a debtor in specific obligations (assignment, cession, accession to debt, assumption of debt, transfer of debt, etc.), offsetting (compensation) and otherwise in accordance with law.
This means that the debtor in the blockade will not be able to conclude any agreement which provides that, for example. a third party will settle its obligation, it will break its own debts to the creditor with receivables that it has towards creditor and the like.
Exception of the cited prohibition is defined by the Article 19 of the Law on tax procedure and tax administration, according to which the business entity, whose accounts have been blocked for the execution of enforced collection, can pay their financial obligations by concluding various contracts and taking other legal transactions solely for the purpose of fulfilling the obligations of public revenue to which this law applies.
So that it is permissible to conclude some of the contracts that will achieve the effect of settlement of financial liabilities based on the public revenues.
It should be noted that the legal capacity of the business entity in the blockade will not be limited, which means the possibility of conclusion of the contracts and continuing to perform activities What is prohibited to himself is the settlement of financial obligations to other entities (other than an entity on whose behalf his accounts blocked) while the blockade continues, but not the conclusion of a contracts that does not produce the effect of settlement of financial obligations during the blockade. For example, it is not forbidden that the debtor blocked agree with his creditor on whose behalf his accounts blocked that he will forgive the part of the debt, write off obsolete claims, that he will extend payment deadlines and the like.
A debtor whose accounts have been blocked, without exception, can fulfil its non-monetary obligations to its creditors.
Penalties for legal entities and entrepreneurs, due to non-compliance with statutory prohibitions
By the Law on performance of the payment of legal persons, entrepreneurs and natural persons who do not perform activities (“Official Herald of RS”, No. 68/2015), has been prescribed the fine for a misdemeanor for the legal entity and the responsible person in the legal entity, as well as for entrepreneurs if at the time of payment the accounts of legal entities and entrepreneurs have been blocked for the execution of enforced collection, and financial obligations are implemented contrary to Article 5, paragraph 2 of the mentioned Act.
The amount of fine for a misdemeanor is not the same legal entity, the responsible person in the legal entity and entrepreneur. A legal entity may be punished for an misdemeanor with a fine of 50,000 to 2,000,000 dinars, the responsible person in the legal entity with a fine of 5,000 to 150,000 dinars, and entrepreneur with a fine of 10,000 to 500,000 dinars.
The settlement of the creditor claims by third parties
From the perspective of a third party, it is not prohibited that the third party conclude a contract with the creditor, by which will be provided that the third party will settle the obligation of the company, which has been blocked. It is essential that the company that was blocked does not participate in the conclusion of this contract.
When the third party settle the obligation of the company, the claim of the creditor moves to this third party according to the law, but also a risk. It is possible that a company will not be able to ever compensate to a third party what it has paid to creditors of the company, that a company goes to bankrupt and that this claim is not paid for.
With a third party who wants to settle obligations of the company can be concluded a contract, but even if it is not concluded, but a third party simply settle obligation (partly or wholly) in accordance with Article 296 of the Law on Obligations, the third party has the right of recourse against the company according to the law in terms of Article 299 of the Law on Obligations. However, it is expedient to conclude a contract.
That would be an agreement on the settlement of obligations of a third party which will be concluded between a creditor and a third party in which it would be stated that the third party accepts the settlement of obligations of the company (specified on which obligations will be applied and in what amount), and that after the execution of the payment, the creditor’s claim exceeds to a third party in the amount in which the third party has paid.
Pledge right on the property of the debtor in blockade and receivables
As it is not forbidden to dispose with assets and to settle non-monetary obligations, it is not prohibited establishment of the pledge right on the property which belong to the debtor, due to the fact of the blocked accounts.
However, if there is no valid reason why the debtor in blockade guarantees for the fulfillment of other people’s obligations with its own property, at first glance it looks like on abuse or intention to damage of creditors and it can be sanctioned under the provisions of the Companies Law and pursuant to the provisions of the Criminal Code.
If it is determined that the debtor establish the pledge right with the intent to damage the creditors it could be sanctioned pursuant to Article 18 of the Company Law through the institute of piercing the corporate veil.
Depending on the conditions and effects, the aforementioned actions which have been undertaken on debtor’s asset with a aim of damage of the creditors may contribute to the creation of conditions for the existence of the following criminal offenses under criminal law:
- causing the bankruptcy (Article 235)
- damage to the creditors (Article 237)
- abuse authorities in economy (Article 238).
Also bearing in mind that one of the essential characteristics of this type of legal work is the fact that, at the time of the conclusion of the pledge agreement, the inability to pay debts on maturity is a future and uncertain circumstance upon which depend on eventual charging of pledgee from the pledged property, the conclusion of a pledge agreement, at the time the pledgor inability to settle its obligations under the basic job quite certain, is contrary to the nature of the legal transaction.
If the debtor in blockade establish a pledge right on their property because of his own obligations (eg. If he got a loan from the bank and based on loans he pledged immovable property and the loan will be used precisely in order to settle creditors), this pledge right is not illegal.
Read more:
Subject matter of the right of security »
Enforcement of claims from client’s accounts »
Contract of Assumption of Debt »