Key Highlights of the Draft Law on Liquidation Proceeding in the Federation of BiH

On 08 February 2024, the Government of the Federation of BiH, during its 27^th session, has confirmed and submitted in parliamentary proceeding the Draft Law on Liquidation Proceeding (hereinafter: the “Draft Law”).

As noted in the Announcement of the Government of FBiH, the Draft Law is a step towards removing obstacles for investments in the Federation BiH.

The most significant novelties introduced by the Draft Law, in relation to the already existing legal solutions, are the following:

• Defining four types of liquidation proceedings: compulsory liquidation, voluntary liquidation, ex officio liquidation, and other cases prescribed by law.
• Compulsory liquidation can be also carried out if a legal entity would not meet the conditions for performance of business activities within the deadline specified in the imposed prohibition measure.
• The court can appoint as a liquidator either a management member of a legal entity upon the proposal of the applicant, or an insolvency administrator from the list of insolvency administrators of the FBiH.
• The liquidator’s liability, both towards the creditors and towards the members of a legal entity, is regulated in more detail.
• The Draft Law regulates a one-year (counting from the day of deletion of a business entity from the commercial register) limitation period for liquidator’s liability for damages.
• The institute of a shortened voluntary liquidation proceeding is introduced, which has been already introduced in Republika Srpska in 2019, and which significantly shortens the duration and simplifies a liquidation proceeding.
• Decisions on opening and closure of a liquidation proceeding are published on the notice board of the court and on the court’s website, except for Decisions on the simultaneous opening and closure of a liquidation proceedings - which are additionally published in the Official Gazette of Federation of BiH.
• The Draft Law regulates the methods of cashing out assets with and without encumbrance.
• Other cases of ex officio liquidation, initiated by the competent authority in the Federation or canton which proves a legal interest, are the following:
  • There are no company’s bodies, or bodies do not perform their duties due to expiration of the term for which they have been appointed
  • The company does not perform its registered business activity, or has no employees and bodies for more than two years.
• The Draft Law regulates the keeping of business books and documents following the deletion of a business entity, as well as the method of settlement of respective expenses.
• The Federal Minister of Justice is obliged to pass the following acts within three months, counting from the day of entering into force of the law:
  • Act on fees and rewards of the liquidator.
  • Act on the design and content of the form for initiation of a liquidation proceeding, form for initiation of a shortened voluntary liquidation proceeding, and the form of a statement of legal entity’s members.

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