General structuring of financing

Choice of law

What territory’s law typically governs the transaction agreements? Will courts in your jurisdiction recognise a choice of foreign law or a judgment from a foreign jurisdiction?

In principle, as a matter of law the parties are free to choose the law governing their transactions, unless the choice of foreign law is made for the purpose of evading the law. The foreign law must be compatible with the imperative norms of Albanian law and with public policies. For transactions with foreign elements, the parties may choose to regulate their transaction pursuant to foreign law, and in this case the Albanian courts are obliged to recognise such choices. Albanian courts subject to the Civil Procedure Code shall recognise a final judgment of a foreign jurisdiction and render it enforceable in Albania, provided that it is a result of a due process of law, does not constitute res judicata or is not under court review in Albania, and is compatible with the basic principles of Albanian law.

Restrictions on cross-border acquisitions and lending

Does the legal and regulatory regime in your jurisdiction restrict acquisitions by foreign entities? Are there any restrictions on cross-border lending?

In general, acquisitions by foreign entities are not restricted, except for a prohibition imposed on foreign entities and subjects acquiring agricultural land in Albania. Albanian law does not impose any restriction on cross-border lending, but such transactions may be subject to restrictions imposed by sanctions regimes, if any. It is crucial that no foreign lending institution may solicit the Albanian public to take loans or financing unless registered in Albania as per the strict banking regularity regime overseen by the Bank of Albania. Furthermore, cross-border financial leasing is governed by international law. However, Albanian law does not elaborate on the international act applicable for specific cases and Albania has also not yet signed the UNIDROIT Convention on International Financial Leasing (Ottawa 1988).

Types of debt

What are the typical debt components of acquisition financing in your jurisdiction? Does acquisition financing typically include subordinated debt or just senior debt?

The debt components of acquisitions in Albania vary depending on the size and specifics of the transaction and the parties involved. The most common cases of acquisition financing use bank loans - mostly secured term loans or revolving loans. Loans may be secured or unsecured. Secured loans are categorised as first lien loans and grant a prime security interest on the assets of the borrower. Failure of the borrower to repay the loan in due time entitles the lender to execute the collateral. Less common are unitranche facilities, mezzanine facilities, public securities and bridge facilities.

Certain funds

Are there rules requiring certainty of financing for acquisitions of public companies? Have ‘certain funds’ provisions become market practice in other transactions where not required?

Purchasers are required by law to provide proof of finance capabilities as a condition precedent to become part of the competitive procedures and also to make preliminarily payment or provide bank guarantees usually calculated as a percentage of the value of the bid offer. This is a common requirement in tendering and procurement procedures, but it is also widely used in the private sector, where the acquiring company provides certain evidence, representations or undertakings confirming its ability and possibility to enter into the transaction. One such provision is the obligation of the shareholders to pay at least one fourth of the par value of the subscribed share capital when establishing a new joint stock company, or one fourth of the subscribed capital increase in the case of a share capital increase.

Restrictions on use of proceeds

Are there any restrictions on the borrower’s use of proceeds from loans or debt securities?

Most loan agreements contain a non-default clause whereby the parties restrict or specify the purpose for the use of the proceeds by the borrower. The Bank of Albania has further underpinned this practice by requiring second tier banks to specify the scope of the loan and the use of proceeds in several types of loan agreements, such as mortgage and consumer loans. There are no legal restrictions on the use of proceeds resulting from debt securities unless the debt instrument provides otherwise.

Licensing requirements for financing

What are the licensing requirements for financial institutions to provide financing to a company organised in your jurisdiction?

Every institution aiming to offer banking or financial services in Albania must be licensed by the Bank of Albania for the specific financial activity intended to be performed. The applicant entity must be registered in the Republic of Albania as a joint stock company and have a minimum capital of 1 billion lekë (approximately €7.2 million) to provide bank services. For non-bank financial institutions the requirements vary, depending on the specific type of activity required to be performed.

Withholding tax on debt repayments

Are principal or interest payments or other fees related to indebtedness subject to withholding tax? Is the borrower responsible for withholding tax? Must the borrower indemnify the lenders for such taxes?

The gross amount of interest is subject to a 15 per cent withholding tax, unless a double tax treaty provides for a lower rate. Payment is withheld at source and usually the lender is held liable for such tax. No withholding tax is applied on principal repayment instalments.

Restrictions on interest

Are there usury laws or other rules limiting the amount of interest that can be charged?

Yes, the regulations issued by the Bank of Albania set out general instructions and methods for calculating and setting interest to be charged on loans addressed to banks and non-bank financial entities and the time during which the banks can charge and calculate such penalties.


What kind of indemnities would customarily be provided by the borrower to lenders in connection with a financing?

Subject to the specific provisions of the agreement, there are various types of indemnities that borrowers may provide to lenders. In relation to the execution of the agreement, borrowers may undertake to pay in case of non-performance, such as failure to pay the instalment in time or repay the credit. The borrower is obliged to pay the full indemnity to the lender, comprising due amounts, accrued interest, penalties, lost profit and any costs the lender has sustained to enforce its rights provided by the agreement.

Assigning debt interests among lenders

Can interests in debt be freely assigned among lenders?

Creditors may assign their interests in debt freely to any third party without the consent of the debtor, provided the interest is not related to rights of a strictly personal nature (especially cause of death and non-levy credits), or the transfer is not prohibited by law. In any case the agreement is made in writing and the assignment is not obligatory upon the debtor unless it has been duly notified on the deed. All kinds of interest and privileges related to a debt may be assigned, except for pledges that require the approval of the pledger, such as credits secured through securing charges. However, parties may contractually prohibit assignment of interests (rights and obligations) arising from their mutual agreements, or restrict it to be allowed only for specific stakeholders.

Companies may also sell their account receivables invoices on the basis of a factoring transaction, which is regulated by the Law on Factoring. The factoring activity may be performed only by banks or specified companies licenced by the Bank of Albania.

Requirements to act as agent or trustee

Do rules in your jurisdiction govern whether an entity can act as an administrative agent, trustee or collateral agent?

In 2013, Albanian legislation introduced the role of a collateral agent in financial collateral agreements. The law also vaguely provides for the possibility of lenders to authorise third parties to execute loans, without, however, providing specific regulations on the matter. Regarding transactions with bonds, the respective law does regulate the function of administrative agents and trustees, which need to be licensed by the Albanian Financial Supervisory Authority (AFSA) to exercise their activity.

Debt buy-backs

May a borrower or financial sponsor conduct a debt buy-back?

Subject to the Albanian Civil Code, if the capacity of lender and borrower falls under the same person, the underlying obligation is annulled. The obligation is restored if the borrower and lender again become separated persons. This practice cannot, however, be used to harm usufruct, or pledge the interests of any third party. Furthermore, Albanian law regulates agreements on repayment of securities applying to financial transactions whereby at least one of the parties is a bank institution or non-bank financial institution, providing the general framework applicable to this kind of transaction. The law on bonds also provides the possibility for the issuer to buy back its own bonds prior to the maturity date, but it must notify the Albanian Financial Supervisory Authority and may not exercise the rights associated with these bonds.

Exit consents

Is it permissible in a buy-back to solicit a majority of lenders to agree to amend covenants in the outstanding debt agreements?

By law the parties are allowed to make an agreement to renew their obligation through new arrangements (which usually imply reduction of the sale price), but there are no provisions regulating exit consent practices. Sectorial laws do, however, provide the parties of a buy-back transaction with the possibility to replace existing securities with new ones, but there is no extended legal elaboration on this matter. For transactions with bonds, the group of bond holders may not undertake decisions discriminating among bond holders.

Guarantees and collateral

Related company guarantees

Are there restrictions on the provision of related company guarantees? Are there any limitations on the ability of foreign-registered related companies to provide guarantees?

In general, companies may freely provide guarantees for themselves or to third parties as long as the underlying asset is the company’s own property and the guarantee is granted in accordance with any eventual restriction and procedure imposed by the statute of the company. However, subject to the Companies Act (see question 15), a company may not dispose of more than 5 per cent of its assets in any matter whatsoever, unless the decision is endorsed by the general assembly.

Furthermore, should the company request a loan from second tier banks, the decision shall be taken in accordance with the provision of the statute of the company; that is, either by the administrators or by request of the general assembly, depending on the characteristics of such transaction.

Second tier banks in Albania will consider granting a loan to Albanian registered companies that are part of a controlling group. In a controlling group, the parent company, which exercises a controlling influence over its subsidiary, may be held responsible for the subsidiary’s creditors. The parent company must provide guarantees to the subsidiary’s creditors, upon request of the creditor, only if the obligation is due and payable (ie, the creditor incurred damage by the subsidiary). This liability of the parent company is applicable, albeit the parent company and the subsidiary are registered in different countries.

No restrictions apply in granting downstream guarantees, either from foreign registered companies or domestic ones, but it runs counter to the spirit of Albanian company law to grant upstream and cross-stream guarantees, and therefore the respective law provisions must be considered restrictive in this regard.

With respect to applicable taxes and fees, these depend on the procedures provided by law to complete certain types of guarantees. Hence, for mortgages, the mortgage agreement shall be both notarised and registered with the Immovable Property Registry. The notarisation fee varies from 2,000 lekë (€16) to 15,000 lekë (€120), depending on the amount of guaranteed repayment. Securing charges are completed upon registration of the securing charge agreement at the Securing Charge Register, in which case the registration fee depends on the term of the guarantee and may be up to 4,000 lekë (€32).

Assistance by the target

Are there specific restrictions on the target’s provision of guarantees or collateral or financial assistance in an acquisition of its shares? What steps may be taken to permit such actions?

The Albanian Companies Act merely states that an acquisition of its own shares by a joint stock company is prohibited, but if so made, the company shall annul or resell such shares to third parties within one year. In all cases, however, a controlling company may not buy shares of its parent company. The Companies Act is silent in respect of any kind of financial assistance or support given by a company to a third party for the acquisition of its own shares. Therefore, it could be construed that no restrictions exist in this respect.

Types of security

What kinds of security are available? Are floating and fixed charges permitted? Can a blanket lien be granted on all assets of a company? What are the typical exceptions to an all-assets grant?

Securities can be taken either over immovable properties (such as land) or over movable property (account receivables, financial instruments, inventories, receivables, machinery and equipment and any other movable items).

The following is a non-exhaustive list of the most common type of security interests that may be granted over assets and their perfection procedure.


The mortgage is used over present or future immovable assets and present or future fixtures related thereto, as well as real rights over immovable property. It is established upon a mortgage agreement made in writing in the form of a notary deed, and is perfected upon registration of the mortgage agreement with the immovable properties registry kept by the local Immovable Property Registry.

Securing charges

Securing charges are non-possessory securities and are used only over movable assets, such as account receivables, financial instruments, inventories, receivables machinery and equipment, and cash collateral over bank deposits, for securing either a present or a future debt. A securing charge agreement is an executive title and in case of default, the asset may be executed under accelerated procedures. If the security is created to guarantee a financial transaction where a financial institution and a legal person are party thereto, or to secure such a third party obligation, the guarantee is treated as a financial collateral and specific rules governing this particular type of guarantee are stipulated under the Law on Payment Systems. The securing charge is created by a written agreement and perfected through registration with the Securing Charges Registry.


The pledge is a possessory security and is only used over movable assets or debtor’s rights for securing either a present or a future debt. Classical pledges are not publicly registered.

Financial collateral

Financial collateral agreements may secure all types of obligations, including present or future, actual, contingent or prospective obligations, owed by the borrower to the lender or his or her appointed agent. At least one of the parties in the financial collateral agreement shall be the Republic of Albania, the Bank of Albania, a foreign central bank, a local bank or financial institution, a foreign bank or financial institution or entity similar to a bank or financial institution, a settlement agent, an operator or another local or international public authority.

Additionally, security over shares is permitted under Albanian law and may be acquired by means of a pledge over shares agreement which is perfected upon its registration with the company shares’ ledger, register of securing charges and publication in the Company Share Register.

Security over movable properties is created through securing charges and registration of the same in the Securing Charges Registry. Fixed charges are most common under Albanian law, as the guarantor gives security over specific assets such as land, machineries or shares. As to floating charges, no floating charge can be created over all immovable properties at once because each property shall be identified under strict property identification numbers and mapping, and registered with the public registry, whether a present or future asset. However, floating charges can be created as security over movable assets of a company as long as a generic yet detailed description of the assets intended to fall under the guarantee is given to the Securing Charges Registry. In this case, the security is created over such movable items up to the guaranteed amount of obligation.

Although Albanian law recognises the concept of future collateral, no blanket lien can be given on all assets of a company. Each type of security is subject to different provisions governing the creation and perfection of security over such underlying assets.

Requirements for perfecting a security interest

Are there specific bodies of law governing the perfection of certain types of collateral? What kinds of notification or other steps must be taken to perfect a security interest against collateral?

The creation of security interest over almost all assets and rights held by project companies is permitted by law. Securities granted over immovable properties and pledges are regulated by the Civil Code.

Securities over movable property are governed by Law No. 8537, dated 18 October 1999, on securing charges. The security agreement must contain a description of the collateral in accordance with the definitions provided by the law, which may not necessarily be an itemised description of the asset.

The cash deposit or the financial instrument may be used as security, subject to a financial collateral agreement. However, the capital market (stock exchange) is not operational in Albania and hence the applicability and implementation of financial collateral agreements is very limited.

With respect to notification procedures, registration with the securing charges registry is completed within 48 hours of the application date. Registration of the share pledge agreement with the Commercial Registry is required within the same period. Registration with the Immovable Property Registry is generally completed within 15 days.

Renewing a security interest

Once a security interest is perfected, are there renewal procedures to keep the lien valid and recorded?

Once the security is created and perfected, there is usually no need to renew the security in the respective registers except for certain situations arising after the perfection of the security and especially the specific expiration of perfection terms set out in the law. For instance, a mortgage can be granted for a period of 20 years starting from the date of its registration. The mortgage ceases if not renewed prior to the expiry of the 20 years term.

A securing charge may be registered up to 25 years or for an undefined period, as indicated in the registration notice. Furthermore, subject to the securing charges law, a chargee who has registered a securing charge and has disposed of a part or the entire ownership of the collateral may amend the part of registration affected by the transferred collateral through registering an amendment notice describing the name of the transferee and transferred collateral.

Stakeholder consent for guarantees

Are there ‘works council’ or other similar consents required to approve the provision of guarantees or security by a company?

Employees of a company that has more than 50 employees may set up an employee council for a maximum term of five years. The main right of the employee council is to be updated and informed about the activities and performance of the company, and there is no obligation in place for the companies to obtain from or consult with the employee council on issues related to provision of guarantees or security whatsoever.

Granting collateral through an agent

Can security be granted to an agent for the benefit of all lenders or must collateral be granted to lenders individually and then amendments executed upon any assignment?

As a general rule, security interest is granted to lenders individually, meaning that each creditor must be the beneficiary of the security interest. As an exception to the general rule, the concept of an agent or trustee has been recently introduced through the Law on Payment Systems, which concerns financial collateral only. From a practical point of view, appointment of the agent is performed by including the latter in the financial collateral agreement. The security agent or trustee is appointed to act on behalf of one lender. The law is silent regarding the appointment of the security agent by more than one lender. The agent is vested with the power to act if an enforcement event arises, by immediately proceeding with the enforcement of the financial collateral.

Creditor protection before collateral release

What protection is typically afforded to creditors before collateral can be released? Are there ways to structure around such protection?

In principle, collateral is effective until it is released or extinguished, or upon payment of debt and consequent removal of the pertaining inscription from the respective register or upon a final court decision ordering the removal. The secured collateral is released upon issuance by the creditor of a specific unilateral deed of inscription release to the register or waiver from the security.

Some typical rights of the creditors are:

  • effective possession over an asset and other real rights associated with it, with some exceptions, such as assets encumbered with a mortgage;
  • granting of consent to the sale of a collateral or substitution of a debtor; and
  • obtaining information from the respective collateral registers etc.

Fraudulent transfer

Describe the fraudulent transfer laws in your jurisdiction.

From the civil law perspective, transactions made with fraudulent purposes, or any action deliberately taken by the debtor to diminish his or her property to undermine a creditor’s legal interests if a deceptive action of a party has led the other party to faulty action, are declared null and void. If the fraudulent action is committed by a third party, the defrauded party may demand the invalidation of legal transaction only when, at the time of its commission, the other party was aware or should have been aware of the deceptive action. A declaration of nullity of the deceptive action shall be decided by the court.

When the legal transaction is declared null and void on grounds of law violations by means of fraudulent actions, anything that the parties have taken from or given to each other is transferred to the state. When one of the parties acted in good faith, the court may decide to return the given property to the party in good faith. If this is not objectively possible, the party in good faith is entitled to a consideration equal to the value of the given property.

From a criminal law perspective, the fraudulent action that has led to the possession of the property through lies or abuse of trust is punishable by a fine or up to five years of imprisonment. Additionally, fraud on presented documents that led to obtaining loans through fictitious registration in property registration offices of objects which do not exist, or which are overestimated, or which belong to someone else’s property, committed with the intent of not paying back the loan, is punishable by a fine or up to seven years of imprisonment.

Debt commitment letters and acquisition agreements

Types of documentation

What documentation is typically used in your jurisdiction for acquisition financing? Are short-form or long-form debt commitment letters used and when is full documentation required?

In most cases of acquisition finance parties use short-form commitment letters, also called letters of offer, which specify the main terms and conditions of the financing. It is generally accompanied by a term sheet setting out the terms of the loan.

Level of commitment

What levels of commitment are given by parties in debt commitment letters and acquisition agreements in your jurisdiction? Fully underwritten, best efforts or other types of commitments?

Most types of commitments incurred in acquisition agreements tend to be fully underwritten and occasionally in debt commitment letters they are of a conditional type.

Conditions precedent for funding

What are the typical conditions precedent to funding contained in the commitment letter in your jurisdiction?

The condition precedent of commitment letters used for funding vary depending on the individual specifics of the transaction contemplated in the agreement, since the parties tend to adjust them to their specific case. However, some of the most common conditions precedent of commitment letters are fulfilment by the borrower of any mandatory legal requirements; receipt and provision of any authorisation, licence, permit or any other document as might be referred to in the commitment letter; fulfilment by the borrower of any obligation to any third party; entering into any other agreement as might be referred to in the commitment letter or fulfilment of any obligation of any other agreement that might have been referred to in the commitment letter; reconfirmation of the representations and warranties given in the commitment letter; and active, solvent and non-defaulting status.

Flex provisions

Are flex provisions used in commitment letters in your jurisdiction? Which provisions are usually subject to such flex?

Flex provisions are not easily included in mutual agreements. However, commitment letters may occasionally contain these types of provisions and most of them relate to the possibility of the lender to adjust the loan amount, the interest rate or any other financial element of the loan in accordance and in proportion to changes in monetary policies, macroeconomic situation, central bank interest rates etc. One of the specific provisions incurred more often than not in bank loan agreements (by analogy) is the possibility of the second tier bank to consider the reference rates as zero, in case they fall below zero for the purpose of calculation of bank interest (for example: ‘Bank interest rate shall be calculated as: 12 month Euribor rate + X. In case the 12 month Euribor rate falls below zero, the parties hereby agree that the bank may consider it as zero for the purpose of calculation of interest rate in the above equation’).

Securities demands

Are securities demands a key feature in acquisition financing in your jurisdiction? Give details of the notable features of securities demands in your jurisdiction.

Bridge loans have not seen significant use in Albania. However, regardless of their infrequent use, some of the securities demands contained in bridge loan agreements are mortgage collateral put on real estate of the borrower, securing charges, pledges etc. Less frequent usage has been seen with equities (of various types, mostly private and shareholders’ equity), while debentures are not common practice.

Key terms for lenders

What are the key elements in the acquisition agreement that are relevant to the lenders in your jurisdiction? What liability protections are typically afforded to lenders in the acquisition agreement?

Some of the key elements of acquisition agreements that are of relevance to lenders are the warranties and declarations of the parties (mostly of the borrower): the provisions relating to certainty of funds and payment of purchase price, closing deliveries and conditions to closing. Lack of financing out clauses, inclusion of the obligation to disclosure, penalties for noncompliance and regulation of outside date provisions in compliance to the interest of lenders are some of the liability protections given to lenders in acquisition agreements.

Public filing of commitment papers

Are commitment letters and acquisition agreements publicly filed in your jurisdiction? At what point in the process are the commitment papers made public?

Acquisition agreements are publicly filed with the National Business Centre and the Centre for Registration of Shares when underwritten, while commitment letters need not be filed.

Enforcement of claims and insolvency

Restrictions on lenders’ enforcement

What restrictions are there on the ability of lenders to enforce against collateral?

In the case of an enforcement event, the lender shall prove before a court the debtor’s default prior to commencing compulsory enforcement procedures through a Bailiff Officer subject to the Civil Procedure Code.

Nevertheless, with respect to securing charges and financial collateral agreements, not only are there no restrictions on the lender to enforce the collateral, but the procedures are easier than for other types of collateral.

Firstly, since a security charge agreement, as per the securing charge law constitutes an executive title, the law allows the lender to choose between different means of enforcement:

  • through the bailiff officer; and
  • without the involvement of the bailiff services, in which case the lender may personally sell the pledge, but before proceeding with the sale, the lender, through the court, solicits the borrower to fulfil its obligation.

Lastly, in a financial collateral agreement, the lender is entitled to immediately proceed with the enforcement and hence sale of the collateral without prior notification or involvement of the court, a public authority or any other third party. However, as already mentioned in question 20, the law was introduced only recently and its applicability within the framework of an insolvency proceeding has yet to be tested.

Debtor-in-possession financing

Does your jurisdiction allow for debtor-in-possession (DIP) financing?

The new insolvency law, which entered into force in May 2017, establishes the concept of debtor-in-possession financing. The insolvency court allows the insolvency administrator to seek and receive financing to support the operations of the business only when the insolvency proceeding was initiated by the debtor and the mass of insolvency is under the administration of the debtor, subject to certain restrictions. The received financing, which is specified in the law, is considered senior to other debts of the company. Lenders in this type of financing are considered as creditors of the insolvency procedure, enjoying a senior ranking among creditors.

Stays and adequate protection against creditors

During an insolvency proceeding is there a general stay enforceable against creditors? Is there a concept of adequate protection for existing lien holders who become subject to superior claims?

The law provides for a temporary stay of 30-60 days on the debtor’s properties until the declaration of insolvency or initiation of the insolvency procedure. Once the court decides the application of the temporary stay, secured creditors cannot enforce their guarantees if the value of the secured collateral is higher than the total value of the credit. Additionally, after the adoption of the reorganisation plan and in particular during the implementation phase of the same, any enforcement request related to claims brought prior to the initiation of the insolvency procedure is automatically suspended throughout the implementation period of such plan.

There is adequate protection in Albanian insolvency legislation in the form of a certain type of relief ensured to creditors with ‘exemption rights’. These are creditors who own a property in the insolvency estate and have the right to request the exemption of the said property or the separation of a certain part of the claimed property. If the said property is sold after the declaration of bankruptcy, the exempted creditor will be classified as a creditor of the insolvency procedure, and as such is entitled to superior rights over the insolvency estate compared to other secured or unsecured creditors.


In the course of an insolvency, describe preference periods or other reasons for which a court or other authority could claw back previous payments to lenders? What are the rules for such clawbacks and what period is covered?

The law provides for the possibility to oppose certain transactions when the same have been performed in a two-year period prior to the declaration of the state of insolvency.

After the declaration of insolvency, the appointed insolvency administrator can file claims against potential adverse actions of the debtor. Annulment of the transaction is required if it adversely affects the estate of insolvency. The party that has taken benefits from the debtor’s action must return any property or right earned accordingly. The claim shall be filed within 10 days from the identification of the transaction, and the court must give a ruling within 30 days from registration of the claim.

In relation to clawback of previous payments, the insolvency court can decide to include again to the insolvency estate any property or any related cash amount transferred as a result of an adverse action. If the said properties or rights have already been transferred to a third party acting in good faith, the insolvency court may order the third party to recover the value of the property in cash, interests included, and include it in the insolvency estate. The statute of limitation for filing a claim against an adverse action of the debtor is three years from the declaration of insolvency.

Ranking of creditors and voting on reorganisation

In an insolvency, are creditors ranked? What votes are required to approve a plan of reorganisation?

Creditor claims are ranked and preference ranking is provided by law for each category and class of creditors as follows.

  • credits deriving from secured financial transactions up to the price of the particular secured asset;
  • credits of preferred creditors claiming credits deriving from:
    • the termination of employment contracts but not later than three months prior to the filing of the request for insolvency, including health insurance and maternity leave, all of which do not exceed 500,000 lekë (approximately €3,700);
    • life expenses arisen prior to the initiation of the insolvency procedure when the insolvent debtor is a physical person;
    • credits of employees for damages deriving from work relations;
    • indemnification claims on life and health damages caused by the insolvent debtor prior to the initiation of the insolvent procedures; and
    • tax claims arisen one year prior to the initiation of insolvency procedures;
  • credits of unsecured creditors;
  • credits of last ranked creditors, which according to legal definition are creditors claiming:
    • penalties for late payments;
    • administrative, criminal and civil liabilities;
    • repayment of loans of related party to the debtor; and
    • last ranked loan as per agreement of the creditor and debtor; and
  • claims of partners and shareholders according to the type of company.

Approval of the reorganisation plan is voted for by the creditors after being recognised as such. The creditors meeting is validly constituted if the majority of creditors, representing at least 50 per cent of the claims, are present in the meeting. As a rule, approval of the plan requires that creditors representing the majority of the claims in every class vote in favour of the presented reorganisation plan. An insolvency judge presides over the meeting. The judge can also delegate such authority to the insolvency administrator. The reorganisation plan shall be presented to the parties at least one month before the meeting. Finally, the plan is validated by the court provided that no complaint is filed against it within 10 days from the creditors’ approval.

Intercreditor agreements on liens

Will courts recognise contractual agreements between creditors providing for lien subordination or otherwise addressing lien priorities?

Albanian legislation is silent with respect to contractual arrangements aiming to create different lien subordination or otherwise addressing lien priorities, and hence does not explicitly prohibit such a solution. From a practical point of view, it may be construed that courts would give effect to subordination agreements to the extent that other creditors’ interests protected under the insolvency law and excluded from the agreement are not impaired. Also, specific classes of lenders within the same ranking category (for example a group of lenders within the category of secured lenders) may agree on putting priorities between them as part of an approved reorganisation plan.

However, in the absence of case law and since the relevant legal framework is new, the effect of contractual subordination agreements affecting the order of lien priorities in an insolvency proceeding has yet to be tested.

Discounted securities in insolvencies

How is the claim of an original issue discount (OID) or discount debt instrument treated in an insolvency proceeding in your jurisdiction?

Special rules set by the insolvency law shall apply to financial instruments and contracts of a financial nature. Thus, contractual transactions affecting financial and debt instruments cannot be enforced after the opening of the insolvency procedure, which automatically implies that no restitution of the debt shall occur, save for the right of compensation for the damages caused.

Liability of secured creditors after enforcement

Discuss potential liabilities for a secured creditor that enforces against collateral.

Insolvency legislation does not provide for any specific liability for the secured creditors.