The most common mistakes during restructuring

According to Coface data, in the first half of 2021, Poland recorded a record 160% y-o-y increase. in the number of corporate insolvencies. In order to recover from financial difficulties and avoid insolvency, companies have to go through a restructuring process, which for most of them is a completely new experience. This, in turn, makes it not difficult to make mistakes and suffer painful consequences. Experts from PMR Restrukturyzacje and the FKK law firm point out what debtors should particularly watch out for and what mistakes they should avoid in order to realistically increase their chances of saving their company.

In order for restructuring to proceed as smoothly as possible for both creditor and debtor, knowledge of the law and experience in similar proceedings is crucial. Unfortunately, a number of challenges and difficult decisions await indebted entrepreneurs during the resolution process, which, if not properly supported, are often accompanied by mistakes.

Every day of delay matters

From the debtor's perspective, the timing of the commencement of the restructuring process is crucial. As emphasised by Aleksandra Pakuła, legal adviser at Kancelaria FKK, filing a restructuring application only when bailiff enforcement proceedings are initiated is far too much of a delay, which may prove to be very costly.

Taking advantage of restructuring as soon as a company's economic situation deteriorates, including a drop in liquidity, is much more effective and gives much more scope for the company to recover from the crisis. Thanks to a quick reaction, the entrepreneur gains the chance to protect the legitimate rights of creditors and increases the probability of preserving the company, its strategic assets and even a quick return to market activities while maintaining full competitiveness

- says Aleksandra Pakuła.

Moreover, there are times when a trader aware of the difficult situation makes attempts to protect his assets. Meanwhile, disposing of property before filing is also a common mistake by the debtor. It is important to bear in mind the existence of the so-called pauliacal complaint, which allows the debtor's actions of the last five years to be rendered ineffective. Other consequences of such actions include hindering restructuring efforts and reducing trust in the debtor, which may reflect negatively on the subsequent stages of the proceedings.

Key creditor-debtor communication

Another mistake is the lack of communication with creditors. According to experts, this is most often due to a mental barrier and a sense of embarrassment about having to restructure. Meanwhile, a frank and direct conversation with creditors, usually has a positive impact on the whole process.

In my experience, seeking meetings with the other party makes it easier to reach an agreement. As the last few months have shown, any trader - often unexpectedly - can find himself in a difficult situation, and efficient communication between the parties makes it possible to significantly change the debtor's position

-suggests Małgorzata Anisimowicz, CEO of PMR Restructuring and qualified restructuring advisor.

She is echoed by Aleksandra Pakuła, who points out that debtors often forget that there are people on the other side who have not been paid in full for services rendered or goods sold.

The whole situation requires a specific approach and a comprehensive explanation of the problems that have arisen, so that the other party is aware of the reasons for insolvency or the threat of such a state. Lack of transparency in this regard is a common mistake that negatively affects the image and credibility of the debtor and, consequently, weakens his position in the restructuring process.

- says the legal adviser at the FKK law firm.

A good restructuring plan for the survival of the company

Małgorzata Anisimowicz - qualified restructuring advisor and President of the Management Board of PMR Restrukturyzacje S.A. and Aleksandra Pakuła legal counsel from Kancelaria FKK Sp. z o.o. sp.k-a provided commentary for the publication for the economic website FilaryBiznesu.pl.

The article appeared on PillarsBusiness.co.uk, 20 September 2021. We invite you to read the full version:"Most common mistakes during restructuring