A bad idea for effective receivership

PMR team

May 9, 2017

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New confiscation laws coming into force this week will allow the state to seize businesses used to make scams or hide the proceeds of crime. However, the owners of such businesses could lose control of them long before a final conviction for fraud - as soon as an investigation begins.

It will all depend on the prosecutor. If he is convinced that the case will end with a conviction and there is a good chance of forfeiture, he will establish a forfeiture order at his discretion. management compulsory and appoint an administrator from among persons holding a restructuring advisor license.

According to the new provision of the Code of Criminal Procedure (Article 292b), it is also possible to secure an enterprise belonging to a collective entity if the evidence collected indicates that it may be held liable for a prohibited act. In other words, the compulsory administrator will enter into both small businesses owned by both a natural person and a joint-stock company listed on the stock exchange.

For this reason, among others, the ministry wants to make the task of the investigators appointing counsel easier. However, it does so - as experts point out - ineptly.

Draft amendment to the act on licensing restructuring adviser places quantitative criteria above qualitative ones.

"Under the assumed content of the draft, a situation may arise in which an inexperienced person who has conducted the required number of four bankruptcy proceedings and two restructuring proceedings, regardless of their size (trivialising, for example, that these proceedings may have concerned six small neighbourhood press shops) and level of complexity will obtain the title of qualified restructuring adviser," the All-Poland Federation of Restructuring Advisers and Syndics points out in its opinion.

In her view, an experienced restructuring advisor who has been conducting only a few large proceedings for a few years, despite objectively greater achievements, qualifications and professional preparation, will not be authorised.

Quantitative criterion

The solution to the problem in the opinion of specialists is simple. It would be sufficient to specify in the bill that an alternative prerequisite for obtaining the title of qualified restructuring adviser is to conduct bankruptcy proceedings with a certain total value of the bankruptcy estate (e.g. min. PLN 50 million).

However, this is not agreed to by the Ministry of Justice. The Justice Ministry argues that the awarding of best practice must be devoid of any arbitrariness. In order to avoid this, it is necessary to rely solely on the testimony of professionals. Because according to the reasoning of the officials, the more cases a counsellor has conducted, the better professional he/she is.

– The number of completed proceedings does not indicate whether someone is prepared to manage large entities – however, Małgorzata Anisimowicz, president of PMR Restructuring Management Board SA and vice-dean of the National Chamber of Restructuring Advisors.

He points out that when dealing with large companies, it is important to have experience in all areas of the business as well as in raising finance. This knowledge, in turn, may be lacking for many advisers, even if they have conducted hundreds of proceedings.

- It would be appropriate to entrust difficult cases, which will undoubtedly include those related to the extended confiscation provisions, to institutional entities, such as commercial law companies. This would involve, for example, personnel or technical facilities, says Anisimowicz.

In her view, it is difficult, after all, to imagine an adviser running an individual practice - even the best one - being in two places at the same time. And such a need often arises in large proceedings.

- Nor is it the case that such counsel should look for an associate to assist them at short notice. Because then there is no certainty that he or she will vouch for the proper handling of matters. An institutional restructuring advisor has both economists, financiers and negotiators on his or her staff, which influences the range of possibilities of action and translates into results, the expert adds.