Pre-pack Reorganization Plan
New Serbian Law on Liquidation has introduced into the business environment a very new legal procedure of the highest quality – Pre-pack Reorganization Plan (PRP or UPPR in Serbian), an institute defined to enable the fastest and widest recovery of business entities facing liquidation procedures due to high indebtness and cash flow problems.
In this situation, depending on the structure and classification of creditors, as well as on the capacity of the debtors, these companies can decide to build their own PRP-s which, once they are accepted by the creditors and liquidation judge, enable them to continue their business activities, and to grow-up to the level of full recovery by re-programming their debts and provided that their business activities are adequate during the period of recovery.
Unique approach that is taken when building Pre-pack Reorganization Plan, and the fact that, apart from the necessary business analysis and creditors classification, it is often necessary to lead sometimes very complex and difficult negotiations with all creditors, re-gain their trust and acceptance for proposed recovery plans. Even more, that readiness is very obligatory, since it is given in the legal form of solemn (written) statements of all three parties – the creditors, the client and the liquidation judge. All these activities make the building of these plans highly-complex and binding process.
Our multi-disciplinary team possess adequate expertise, and our long-term contacts and liaisons with business banks, combined with in-depth knowledge of current business environment in Serbia, enable us to support our clients in negotiations and communication with all relevant parties – creditors (business entities and banks), providers, buyers, but also with institutions, which is of utmost importance in this, crucial phase of their business. Furthermore, we are mainly recommended by the banks, as the biggest creditors, to communicate with their clients which need this kind of support.
Our experience proves that well-built, quality Pre-pack Reorganization Plan, which is feasible and thoroughly structured, provides business entity that is to implement it with significantly increased chances of recovery and return to path of business success compared to the other means of recovery of the companies facing liquidation or bankruptcy procedure.
Advantages of the PRP compared to the other bankruptcy or liquidation procedures are, apart from those that are obvious (the fact that the company is focused on recovery, and not on shutting its business down), is the fact that, under the current circumstances at the local market, creditors are willing to make more compromises, having in mind that the capital market is very narrow and that such plans are often the best and ultimate chance for the creditors to get their money back from their debtors that are facing bankruptcy.
It is worth noting another big advantage of the PRP, which is the fact that the preparation of the quality PRP takes 45-60 days, and its implementation lasts mainly between 6 and 12 months. This, relatively short period of time is recognized as high value for both, debtors and creditors, and is additional quality for pre-pack reorganization plan as the way for overcoming critical situations and avoiding bankruptcy or liquidation procedure.