Other forms of restructuring

Proceedings for the approval of the arrangement

The procedure is envisaged for debtors who are able to collect the votes of the required majority of their Creditors supporting the terms of the arrangement on their own, with the support of a restructuring advisor and without the involvement of the court:

  • The procedure allows for an agreement to be reached through a settlement with creditors.
  • The entrepreneur independently selects a Restructuring Advisor with whom he will jointly conduct the proceedings.
  • The vast majority of the proceedings take place without court involvement.
  • Protection of the Entrepreneur from Bailiff enforcement.
  • The entrepreneur is left in charge of the business.
  • Duration 3 to 6 months.

It is possible to include only a part of the existing debts, which have a significant impact on the further functioning of the company, e.g. public liabilities such as those to ZUS or tax obligations

Accelerated arrangement procedure

This restructuring procedure is relatively quick, is opened at the request of the debtor and is conducted before the Restructuring Court allowing an agreement to be concluded after the preparation and approval of an inventory of claims in a simplified procedure.

This type of procedure can only be conducted against entrepreneurs in which the sum of disputed claims entitled to vote on the arrangement does not exceed 15% of the sum of claims entitled to vote on the arrangement.

It is one of the two types of proceedings (in addition to proceedings for the approval of an arrangement), which allows for the inclusion in the proceedings and restructuring of only some of the existing debts with a significant impact on the further functioning of the enterprise, e.g. public-law liabilities (also towards ZUS or the Tax Office), financing institutions (banks, lessors), lessors, a specific other homogeneous group of creditors (from transport services, supplies of goods, services, fuels).

As from the date of the opening of the proceedings, payment of all claims covered by the arrangement which arose before the date of the opening of the proceedings shall be suspended.

During the proceedings, the company is protected from enforcement. Enforcement proceedings initiated prior to the opening of the proceedings are suspended by operation of law, and the initiation of new ones after the opening of the proceedings is not permitted. In addition, the judge-commissioner, at the request of the debtor or court supervisor, may revoke an attachment made before the date of the opening of the proceedings

Proceedings provide protection against termination of business-critical leases, tenancies and other contracts essential to the running of the business

The entrepreneur is, as a general rule, left in charge of the business....

Duration approx. 12 months

Arrangement proceedings

Arrangement proceedings are initiated at the request of the debtor and conducted before the Restructuring Court; however, unlike accelerated arrangement proceedings and proceedings for the approval of an arrangement, they may be conducted against entrepreneurs whose disputed receivables exceed the 15% threshold and, therefore, a judicial resolution of disputes and recognition or non-recognition of receivables is necessary.

As from the date of the opening of proceedings, the payment of all claims which arose before the date of the opening of proceedings shall be suspended.

All debts arising prior to the date of the opening of the arrangement procedure are subject to the procedure; partial restructuring of debts is not possible under this procedure.

During the proceedings, the company is protected from enforcement. Enforcement proceedings initiated prior to the opening of the proceedings are suspended by operation of law, and the initiation of new ones after the opening of the proceedings is not permitted. In addition, the judge-commissioner, at the request of the debtor or court supervisor, may revoke an attachment made before the date of the opening of the proceedings

Proceedings provide protection against termination of business-critical leases, tenancies and other contracts essential to the running of the business

Entrepreneur, is left in charge of the company, however, in the circumstances defined by the law related to the commission of material violations, it may be revoked.

Once the proceedings have been opened, the court supervisor shall join, by operation of law, the judicial, administrative and arbitration proceedings concerning the mass of the arrangement in which he has the rights of a party.

Partial arrangement procedure - Partial arrangement

Partial arrangement proceedings may be concluded as part of the arrangement approval procedure and the accelerated arrangement procedure:

  • Covering only a part of existing debts, which have a significant impact on the further functioning of the company, e.g. public liabilities such as those to ZUS or tax liabilities
  • The entrepreneur independently selects a Restructuring Advisor depending on the type of proceedings.
  • Uninterrupted operations with a 'freeze' on the obligation to repay key liabilities pending settlement.
  • Provides an opportunity to restructure secured liabilities without the need for creditor approval
  • It is a condition of 'compulsory' entry of creditors into proceedings that proposals are made which presuppose payment of the claim in an amount not less than that which could be obtained if it were to be claimed from the object of the security.
  • Enables non-bank debt restructuring and consolidation and almost complete reduction of the risk of interest rate changes, which is crucial in the face of unprecedented interest rate increases
  • Limited time for proceedings

Sanitation proceedings

Sanitation proceedings are initiated at the request of the debtor and conducted before the Restructuring Court, while they are dedicated to companies in need of full and deep restructuring of their operations in operational, financial and legal terms.

As from the date of the opening of proceedings, the payment of all claims which arose before the date of the opening of proceedings shall be suspended.

All debts arising prior to the date of the opening of the arrangement procedure are subject to the procedure; partial restructuring of debts is not possible under this procedure.

The court may decide to leave the entrepreneur in charge, but if such authorisation is not granted after the opening of the sanitation proceedings, the debtor shall identify and hand over all its assets to the administrator and shall surrender documents relating to its business, assets and accounts, in particular its books of accounts, other records kept for tax purposes and correspondence.

In the course of the proceedings, the administrator may rescind a reciprocal agreement that has not been performed in whole or in part before the date of the opening of the sanitation proceedings, with the consent of the judge-commissioner. This is a fundamental power of the administrator, which is a measure of the effectiveness of the sanitation proceedings as a restructuring tool.

The statutory solutions allow for strong employment restructuring, as the opening of sanitation proceedings affects employment relations and has the same effects on the rights and obligations of employees and the employer as a declaration of bankruptcy, with the powers of the trustee being exercised by the administrator - the following effects set out in the Labour Code, among others, take place:

Reducing the period of notice of termination of an employee's permanent or fixed-term employment contract - cf. Article 36§ 1 c.p.;

exclusion of provisions protecting certain employees from termination of employment - cf. Article 41§ 1 c.p.c., which relates to the situations set out in the Article 3839 i 41 c.p.

Sanctioning proceedings are the proceedings that protect the debtor to the fullest extent. This has an important justification in terms of purpose, as in some cases the actual restructuring of a company requires the complete suspension of coercive actions against the debtor. All enforcement proceedings directed against the assets of the debtor forming part of the sanitation mass initiated before the date of opening of the sanitation proceedings are suspended by operation of law, whereby the Judge-commissioner may waive the seizures made in those proceedings, as well as the seizures made in the proceedings to secure claims, if this is necessary for the continued operation of the enterprise. The suspension of enforcement proceedings applies both to proceedings concerning claims covered by the composition agreement by operation of law and to proceedings which concern claims not covered by the composition agreement by operation of law, including claims which are secured on the debtor's property by mortgage, pledge, registered pledge, fiscal pledge or maritime mortgage. In addition, once the proceedings have been opened, directing enforcement to the debtor's property forming part of the sanitation mass is not permitted

Judicial, administrative, judicial and arbitration proceedings relating to the bankruptcy estate may only be initiated and conducted by or against the administrator.

Comparison of proceedings

 Proceedings for approval of the arrangementAccelerated arrangement procedureArrangement proceedingsSanitation proceedings
Time of opening of proceedingsEven 1 day - after signing the agreement with the restructuring advisor, effects of opening with an arrangement date to be determined by the debtor in agreement with the restructuring advisorUpon the debtor's application to the Restructuring Court - according to the Act, it should be heard within 1 week of the filing of theUpon the debtor's application to the Restructuring Court - in accordance with the Act, within two weeks from the date of the application, unless there is a need for a hearing - within six weeks.Upon the debtor's application to the Restructuring Court- in accordance with the Act, within two weeks from the date of the application, unless there is a need for a hearing- within six weeks.
Participation of the General CourtMinimum - at the stage of filing the application for approval of the arrangementFully conducted before the CourtFully conducted before the CourtFully conducted before the Court
Management of the companyFull on the part of the company, in the case of a made notice of the day of arrangement limited to the scope of ordinary managementManagement of the company in the field of ordinary management - in cases specified by law, the possibility of revoking theManagement of the company in the field of ordinary management - in cases specified by law, the possibility of revoking theFull management of the business is exercised by the Trustee, the Court may allow the debtor to exercise management over all or part of the business to an extent that does not exceed ordinary management
Pre-enforcement protectionFrom the notice fixing the day of arrangement for a minimum period of 4 monthsFrom the date of the opening of proceedingsFrom the date of the opening of proceedingsFrom the date of the opening of proceedings
Claims covered by the arrangementAll or only some (partial arrangement) arising before the arrangement dateAll or only some (partial arrangement) arising before the date of opening of proceedingsAll arising before the date of opening of proceedingsAll arising before the date of opening of proceedings
Disputed claims  It may not exceed 15% of the sum of claims entitling the holder to vote on the arrangementIt may not exceed 15% of the sum of claims entitling the holder to vote on the arrangementMay exceed 15% of the sum of claims entitled to vote on the arrangementMay exceed 15% of the sum of claims entitled to vote on the arrangement
Costs of proceedingsLow - from £15-20k for the entire period of the proceedingsMedium - dependent on the number of creditors, the amount of claims, the complexity and duration of the proceedingsMedium - dependent on the number of creditors, the amount of claims, the complexity and duration of the proceedingsHigh - dependent on the number of creditors, total claims, average monthly turnover, complexity, effects and duration of proceedings
 

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