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New Restructuring Law - new opportunities to get out of the crisis

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Under the New Restructuring Law, entrepreneurs who are even at risk of insolvency will be able to take advantage of tools to protect them from aggressive debt collection and further loss of liquidity. How companies can be helped in practice is explained by restructuring advisor Maciej Roch Pietrzak.

The Restructuring Law introduces new regulations on how to get out of debt. How do you choose the best solution?
The new law simplifies restructuring procedures and introduces effective tools that have not been previously known. Therefore, the key to the effectiveness of the actions will be the selection of the optimal repair procedure, adequate to the existing problems and the proper design of the system architecture.
In the difficult selection of procedures and implementation of restructuring, entrepreneurs will be supported by licensed restructuring advisorsThey will indicate the optimal arrangement proposals, help in negotiations with creditors and in obtaining financing.

One of the restructuring proceedings provided for in the new Act is the procedure for approval of an arrangement by independent collection of votes. In which case will this solution be the most favourable?
Approval procedure system is a safe and minimally invasive restructuring tool. It is a perfect solution for companies in the initial phase of the crisis, who want to reach a quick agreement with their creditors, without publicizing the information about the problems that have occurred. This procedure will facilitate agreement with creditors, if only for tax optimisation reasons, as any debt reduction will constitute a cost of obtaining income on the part of the creditor, while not constituting income on the part of the debtor. In accordance with the principle of the balance of interests, both parties to the arrangement have considerable autonomy in making decisions and tax attractiveness, while at the same time there is low interference from court supervisors.
The arrangement procedures have been shortened as much as possible to enable the fastest possible conclusion of the arrangement and resolution of the crisis. This is an absolute revolution in the regulations, because the debtor collects votes independently creditors and after obtaining the required majority, submits an appropriate application to court. The role of the court will therefore be significantly limited and will consist in a formal assessment of the application and the correctness and legality of the concluded arrangement.

So who can benefit from this procedure?
This is an important question because a strictly defined group of entrepreneurs can benefit from the approval of the arrangement through independent collection of votes. This group includes debtors who they want to negotiate with their main creditors and companies that anticipate a significant reduction in revenues at a given level of costs. This is a solution for companies that are just starting to lose their balance, e.g. due to the loss of a key client or an embargo on a major sales market. The procedure is permissible when disputed receivables do not exceed 15% of total receivables.
It is important that the Act provides an opportunity for restructuring at such an early level. Conscious entrepreneurs will undoubtedly appreciate and benefit from this tool as it protects against loss of trust and credibility and allows significant restructuring commitments.

What exactly do you have in mind?
The tool gives the entrepreneur the opportunity to conclude an arrangement without making it public. information about restructuring. It is made public only when the application is filed with the court, i.e. after the arrangement is concluded and the crisis is resolved. Therefore, only the creditors who were approached by the debtor with the arrangement proposal know about the temporary problems. Paradoxically, this may be a positive signal. They see that entrepreneurs care about real protection of the company and appreciate his immediate reaction. An arrangement with creditors can therefore strengthen relationships with contractors who support each other in more difficult moments. Therefore, it is worth building mutual trust in business and creating a culture of restructuring on the Western model.

How does the procedure practically protect the company at risk?
The arrangement is accepted if the majority of voting creditors having at least 2/3 of all receivables covered by the arrangement vote in favor of it. For example, when we have four creditors, three of whom are in favor conclusion of an agreement, and one is against it - currently this one initiates enforcement and prevents the conclusion of an agreement, often leading to the liquidation of the company. According to the new regulations, these three creditors will be able to outvote the fourth creditor and he will automatically be bound by the arrangement. He will not be able to conduct enforcement against the others. This is a real chance to stabilize this type of situation and the fastest way to get out of companies out of crisis.

The material appeared on the website:

14 November 2015:
" Pre-Judicial Arrangement in the New Restructuring Law
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