In the efficiency audit of the bankruptcy proceedings, the RS Supreme Audit Office wrote that a chance for recouping claims was missed because of the irregular bankruptcy proceedings. The report noted that during this period around 420 bankruptcies were initiated, while 370 of them were brought to an end.
Two main goals in a bankruptcy are to share the debtors assets fairly among the creditors and to eliminate the debtors from the economic life of a country so that the resources of unprofitable companies can be transferred to where they’ll be used efficiently.
The report said that the biggest creditors in the bankruptcy proceedings are public sector institutions, workers and public companies. Public sector institutions are the biggest creditors but at the same time they recoup the smallest amount of they’re owed. There is no database of the public sector creditors’ claims.
The RS government got involved in bankruptcy proceedings by buying 22 bankrupt companies. This was paid around 65 million KM, plus additional 75 million KM to pay off workers. Records collected by the RS ministry of industry show that the companies that the government bought are producing losses, have obsolete equipment, older workforce, lack of liquidity, etc. which led the auditors to conclude that the entity government has not reached the goals. The government goal was to make companies attractive for sale.
The RS Supreme Audit Office warned that the firms lodge a debtor’s petition way too late. The legal deadline for filing for bankruptcy is 60 days from the moment that the company is unable to meet its financial obligations. The auditors found that half of the companies was not liquid for more than two years, and 30 percent of them longer than four years. By inadequately delaying filing for bankruptcy, the companies miss an opportunity to save their property.
Auditors warn that there is no single clearing house that would monitor lack of liquidity in businesses. No government agency has been assigned with monitoring the lack of liquidity in businesses and taking actions based on the financial information.
Auditors also wrote that the costs of handling bankruptcy proceedings may cost up to 90 percent of the bankruptcy estate. The main reason for enormous costs are the long length of the proceedings and high reimbursement of persons in charge of the proceedings.
There is no official records of the number of companies that have gone into bankruptcy and other data, such as the percentage of collected claims and the incurred losses following the end of the bankruptcy. Reporters from the Center for Investigative Reporting (CIN) in Sarajevo have found that more than 2,400 business have filed for bankruptcy in BiH in the past ten years. Nearly 1,900 of these came to a close — most winding up.
Many of these businesses have been deliberately destroyed following the privatization and through the bankruptcies the owners got rid of their obligations towards the workers and found ways to steal the privatized companies’ property away from the minority shareholders.