Guidelines on the Disclosure of Information Regarding Pre-Bankruptcy Proceedings

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Pursuant to Article 15(4) of the Act on the Croatian Financial Services Supervisory Agency (Official Gazette nos. 140/05 and 12/12) and Article 696 of the Capital Markets Act (Official Gazette nos. 65/18 and 17/20), the Croatian Financial Services Supervisory Agency, at a meeting of its Management Board held on 18 December 2020, adopts GUIDELINES ON THE DISCLOSURE OF INFORMATION REGARDING PRE-BANKRUPTCY PROCEEDINGS

1. Introductory Provisions and Purpose of the Guidelines
   The Croatian Financial Services Supervisory Agency (hereinafter: Hanfa) is, in accordance with the provisions of the Capital Markets Act (Official Gazette nos. 65/18 and 17/20, hereinafter: CMA), authorized to continuously monitor and supervise trading on the regulated market managed by the Zagreb Stock Exchange, as well as the fulfillment of information disclosure obligations regarding issuers whose securities are listed on the regulated market (hereinafter: issuers), with a view to ensuring orderly, fair and proper trading and identifying potential market abuse by market participants. The purpose of the Guidelines on Information Disclosure Regarding Pre-Bankruptcy Proceedings (hereinafter: Guidelines) is to provide additional instructions to issuers regarding the disclosure of information concerning pre-bankruptcy proceedings initiated against an issuer, with a view to ensuring orderly fulfillment of their transparency obligations prescribed by the CMA and Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (Market Abuse Regulation), and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EU, 2003/125/EU and 2004/72/EC (hereinafter: Market Abuse Regulation). The objective of the Guidelines is to improve and harmonize existing practices and procedures of issuers who have submitted a proposal for the opening of pre-bankruptcy proceedings or against whom such proceedings have been opened, in order to inform the investment public and fulfill transparency obligations prescribed by the CMA and the Market Abuse Regulation. The conduct of pre-bankruptcy proceedings is governed by the Bankruptcy Act (Official Gazette nos. 71/15 and 104/17), for whose implementation Hanfa is not competent. However, Hanfa is authorized to supervise the disclosure of information by issuers, and these Guidelines specify possible standards and desirable practices that issuants should apply when disclosing information on pre-bankruptcy proceedings.

2. Disclosure of Information Regarding Pre-Bankruptcy Proceedings
   Pre-bankruptcy proceedings are a form of corporate financial restructuring aimed at establishing liquidity and solvency, which may be initiated by the debtor or a creditor with the prior consent of the debtor. The primary objective of restructuring is to reduce debt and stabilize corporate operations through measures that enable business sustainability, namely regular debt servicing.
   With the entry into force of the Bankruptcy Act on 1 September 2015, provisions concerning pre-bankruptcy proceedings from the Financial Operations and Pre-Bankruptcy Settlement Act ceased to apply, whereby the conduct of pre-bankruptcy proceedings was fully placed under the jurisdiction of commercial courts, while the Financial Agency remains in pre-bankruptcy proceedings as technical and administrative support to the courts.
   Information on a proposal for initiating pre-bankruptcy proceedings or the initiation of such proceedings itself, as well as certain information during the course of pre-bankruptcy proceedings (for example, claimed or disputed claims, restructuring plan or pre-bankruptcy settlement) may constitute inside information or contain certain inside information. Furthermore, it should be noted that this information is particularly important for issuers whose financial instruments are listed on the regulated market, as confirmed by the fact that, for example, in accordance with the Zagreb Stock Exchange Rules, the circumstance that pre-bankruptcy proceedings have been opened against an issuer constitutes grounds for rejecting a request to list financial instruments on the regulated market, and that the opening of pre-bankruptcy or bankruptcy proceedings against an issuer whose shares are already listed on the regulated market is a reason for the extraordinary transfer of that issuer's shares to a lower segment of the regulated market. In the event of submitting a proposal for initiating pre-bankruptcy proceedings or initiating such proceedings, this concerns information relating to the issuer's operations that may have a significant impact on the price of the issuer's financial instrument. The mere fact that an issuer has submitted a proposal for opening pre-bankruptcy proceedings, which indicates that the issuer is experiencing certain operational difficulties regarding the settlement of its obligations, is undoubtedly information that will reflect, to a greater or lesser extent, on the movement of the price of the issuer's financial instrument. Based on Article 7 of the Market Abuse Regulation, an issuer assesses whether this information, specifically the information on submitting a proposal for opening pre-bankruptcy proceedings or the ruling on opening such proceedings, as well as other information related to pre-bankruptcy proceedings (for example, restructuring plan, pre-bankruptcy settlement, reports and the like), constitutes inside information or is non-inside information. Although all court documents related to pre-bankruptcy proceedings, in accordance with the provisions of the Bankruptcy Act governing the implementation of the entire procedure, such as decisions, notices and other documentation, are published on the e-Court Bulletin Board website, thereby ensuring public disclosure, it is the issuer's responsibility, if it assesses that any of these pieces of information constitutes inside information or contains such information, to disclose them in accordance with the CMA and the Market Abuse Regulation. By disclosing this information, the issuer fulfills its transparency obligations to the investment public, thereby ensuring an equal position for all capital market participants regarding access to information that serves as the basis for investment decisions. Likewise, issuers should act in a manner that ensures all prescribed information
   is publicly available at designated locations and within stipulated timeframes, in order to reduce or completely avoid instances of publishing unverified, unofficial and speculative information from other sources, or the publication of official information at other locations in accordance with special legislation provisions, without publishing such information at the places prescribed by the CMA.

3. Final Provisions
   Issuers are obliged, in the event of submitting a proposal for initiating pre-bankruptcy proceedings and the initiation of such proceedings, to undertake all necessary activities to align their disclosures with these Guidelines.
   These Guidelines will be published on Hanfa's website and enter into force on 1 January 2021.
   CLASS: 011-02/20-01/04
   REFERENCE NO.: 326-01-60-62-20-1
   Zagreb, 18 December 2020.
   CHAIRMAN OF THE MANAGEMENT BOARD dr.sc. Ante Žigman

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