Restructuring advisers without remuneration

PMR team

May 29, 2019

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Restructuring advisors have to wait up to years to be paid for their work and often do not get paid at all.

Professionals who are responsible for restructuring companies complain about the difficulty of getting paid.

- For half of the restructuring proceedings that we conducted, DGA did not receive remuneration or reimbursement of expenses incurred for them," says Andrzej Głowacki, president of DGA Centrum Sanacji Firm.

Success bonus

Salary amount restructuring advisers and the method of its payment has been regulated in the Restructuring Law, which came into force at the beginning of 2016. In general, the payment depends to a large extent on the results of the proceedings, and if they do not end positively, there is no guarantee of receiving it.

- The legislator wrongly assumed that the majority of proceedings would be successful. Meanwhile, studies and analyses of the operation of the aforementioned Act clearly show that only a few per cent of proceedings were concluded with creditors, and the number of executed agreements can be counted on the fingers of one hand, says Andrzej Głowacki.

- The idea was to reward the involvement of advisers by making a successful arrangement with creditors. In principle, this is not a bad idea. But making the payment of the entire amount conditional on the implementation of the arrangement, which sometimes takes many years, should not be at the expense of such specialists, emphasises Małgorzata Anisimowicz, President of PMR Restrukturyzacje.

Lengthy proceedings

According to Piotr Zimmerman, legal adviser and restructuring adviser in the company Zimmerman i Wspólnicy, the situation of advisors would be much better if the payment of remuneration took place at least in terms similar to the instructions provided for in the act. However, the proceedings are lengthy, and the act does not provide for mechanisms to protect the interests of advisors in such situations.

The problem does not apply to proceedings for approval of an arrangement. Here, the debtor's agreement with the arrangement supervisor handles the subject in an arbitrary manner. However, already in the most common accelerated arrangement procedure (PPU), the barrier is the lack of advance payment and deposit for the remuneration of the administrator.

- Everything would be fine if the proceedings lasted 3-4 months, as planned by the legislator. But when the supervisor has to wait 6-12 months for its conclusion and the remuneration order contained therein, it becomes a problem to cover the usual running costs, says Piotr Zimmerman.

If the PPU is discontinued, the court supervisor is obliged to do so within a week submit an application to determine the remuneration. Very often the debtor files an appeal against the court's decision to discontinue. It takes 2-6 months to consider it. During this time the debtor usually gets rid of the cash. If the appeal is dismissed, he files it again in the district court and again he has to wait a few months.

- A receiver soon appears and it remains for the restructuring advisor to report its claim to the bankruptcy estate," explains Andrzej Głowacki.

- If the arrangement in the PPU is not accepted, the supervisor is entitled to 40 percent of the remuneration. But there is no way to get the money, especially if it turns out that the debtor's company has no assets to declare bankruptcy - says Malgorzata Anisimowicz.