April 6 (SeeNews) - Croatia's parliament passed an emergency law on Thursday to shield the country's economy from big corporate bankrupcties.
With 83 votes in favour, 46 against and two abstentions, parliament passed the bill regulating extraordinary administration in companies of systemic importance, parliament speaker Bozo Petrov said in a session aired live by broadcaster HRT.
Companies of systemic importance, according to the law, are those that employ over 5,000 workers and whose obligations top 7.5 billion kuna ($1.1 billion/1 billion euro).
The law, commonly known as 'Lex Agorkor', was drafted by Croatia's government in response to financial troubles that emerged recently at the country's biggest private concern.
'Lex Agrokor', which could come into immediate effect, allows the government to appoint temporary management to lead a restructuring process at the request of the company's creditors or the debtor itself.
The new legislation faced fierce resistance from the opposition during a two-day debate in parliament.
On Wednesday, in his address to parliament, prime minister Andrej Plenkovic defended the government decision, saying that the law was drawn up to protect the country and its economy.
"[...] this is not Lex Agorkor but a law which allows Croatia, its government and a vast majority of its parliament to protect the interests of the Croatian financial system, of its economy, workers and employees of Agrokor, family farms, suppliers and all stakeholders who are currently involved in the processes going on in our largest company,“ Plenkovic said.
The prime minister noted that the law will also protect Croatian taxpayers because it applies to companies which employ 11.5% of the country's workforce and contribute 34.6% of the country's GDP.
"Agrokor is a company with 60,000 employees, not only in Croatia but also in neighbouring countries, with more than 5,000 suppliers, with more than 70 units within its concern which are currently facing difficulties“, Plenkovic explained.
Several amendments to the draft law were introduced in the last 24 hours, with changes to paragraph three termed by media as the most important.
Namely, paragraph three article 39 says that following the activation of 'Lex Agrokor', the first creditor that offers a loan to the company gets priority in the collection of receivables in case of a potential bankruptcy.
According to media reports, several banks have sought this type of safety net from the government in exchange for a loan to Agorkor.
Another important amendment bars creditors from launching litigation, administrative and security procedures, or procedures for out-of-court debt collection, against the debtor, its subsidiaries, affiliated companies and suppliers during the period of extraordinary administration.
Several Agrokor units and suppliers have had their bank accounts frozen over the concern's financial woes. On Thursday, its suppliers threatened to suspend the delivery of goods if a deal over Agrokor's debts isn't reached with the banks by the end of the day.
In a public address to the media, suppliers said they are worried about their existence because they are not getting paid.
"We are pumping fresh money into Agrokor, and that's untenable. I'm talking 24 hours and then supplies will be suspended", CEO of Dukat dairy company, Alen Fontana, told the media, according to news agency Hina.
Earlier this week, several of Agrokor's biggest suppliers, including coffee and snacks manufacturer Franck, said they back the new legislation and expressed doubts in the success of the standstill arrangement currently being implemented in the company.
The standstill agreement signed by Agrokor's biggest creditors - VTB, Sberbank, Erste&Steiermaerkische Bank, Privredna banka Zagreb, the local unit of Austria's Raiffeisenbank and Zagrebacka Banka - led to the appointment of a chief restructuring officer and a team of international experts at the helm of the company earlier this week.
On Wednesday, Plenkovic said that the standstill agreement is Scenario A, while the new law represents Scenario B and will be activated if the first option fails.
He referred to the law as a safety net for the Croatian economy.
(1 euro=7.45984 kuna)