The adoption of the Restructuring Law and extensive changes to the Bankruptcy Law - significantly increase the chances of saving many Polish companies in a difficult financial situation. The changes are fundamental, as the entire procedure for dealing with debtors' claims is being reorganised. Nevertheless, it should be remembered that even the best law will not have a positive effect if it is not applied early enough or is applied incorrectly.
There will undoubtedly be changes companies in trouble have many benefits – right now we see entrepreneurs interested in new tools. However, these are only changes in the law. Real improvement depends on people – judges, restructuring advisors and, above all, entrepreneurs themselves, i.e. debtors and creditors, on whose speed of decision the fate of many a company depends.
Antidote to company problems
From January 1, 2016, companies in trouble will benefit from the New Restructuring Law. Under the act, entrepreneurs who are at risk insolvency will be able to use restructuring tools, protecting companies from aggressive debt collection and further loss of financial liquidity. In this way, they will gain a chance to restore their ability to compete in economic turnover and repay liabilities to their creditors.
The amended Bankruptcy and Restructuring Law will also change, introducing a new (slightly more liberal) definition of the state of insolvency and extending the deadline for establishing bankruptcy petition. In addition, a regulation has been introduced that will allow the debtor to file an application to sell the company in whole or in part (without encumbrances) as part of the bankruptcy proceedings. to the purchaser and on the terms agreed before the declaration of bankruptcy, but only those accepted by the court. The solution (as in foreign pre-packs) will protect jobs and will facilitate and accelerate the turnover of organized enterprise assets.
The Restructuring Law is also the introduction of new safeguards for creditors' rights at each stage of the resolution process. These are two major steps towards changing the philosophy of the approach to insolvency. A shift from a culture of liquidation to a culture of restructuring. Two big, but nevertheless only first steps. Another challenge is to educate entrepreneurs on how they can use the options available to them to save their businesses.
Law as "Clinic for Business"
The new law protects the operational activity and financial liquidity of entities in restructuring process, gives a great chance of effectively regaining stability and avoiding bankruptcy. For this purpose, the legislator has proposed four types of proceedings, which can be applied in various variants and configurations. The procedures differ from each other in many respects. Their in-depth analysis rests on the restructuring practices. Basically, however, it should be pointed out that the variety of procedures should correspond to the variety of situations in which companies find themselves. Different procedures, like medicines for illnesses, allow for the application of less complicated panaceas (e.g. independent collection of votes) for minor problems. In the case of major difficulties, a bitter but effective medicine is recommended, i.e. sanitation proceedings, allowing for a deep financial and operational reorganization of the indebted company.
Ultimately, there are four restructuring procedures available to entrepreneurs, in order of simplicity: for approval of an arrangement, accelerated arrangement procedure, 'ordinary' arrangement procedure and sanctioning procedure. The aim of each procedure is to avoid the need for the debtor to declare bankruptcy under the existing 'arrangement procedure'. In the sanitation procedure, it will not only be possible to restructure debts through an arrangement with creditors, but also to restructure the company itself (e.g. restructuring of contracts, assets or employment) - with the rights of creditors secured through the appointment of a court administrator.
The effectiveness of the procedures is increased by the fact that the failure to implement one procedure does not exclude the use of another. Based on the previous regulations after the fiasco of the system the company was doomed to bankruptcy liquidation. The new regulations provide for a scenario of submitting a simplified application for restructuring (enabling operational or property restructuring), when an arrangement with creditors (i.e. if the debt restructuring) has no chance of success. What is more, the legislator has provided for the possibility of parallel applications for partial arrangements for different groups of creditors (e.g. only with financial institutions, and excluding suppliers).
For a "diagnosis" to a specialist
It is worth pointing out that the assistance offered by the legislator will be long-term, professional and, most importantly, applied on many levels. The delegated expert who will safely guide the entrepreneur through the entire process of repairing the company will be a restructuring advisor - a licensed practitioner of repair implementations, supporting companies with their experience and knowledge. An advisor must combine many unique competencies, including business strategist, economist, lawyer, negotiator and efficient manager.
His main task will be assistance in building an optimal restructuring architecture that will enable the company to be saved. He will perform a thorough analysis of the situation and advise on which restructuring procedure or procedures to choose so that it is most beneficial for the organization, and therefore for the creditors. He will help prepare application to the court, will indicate possible sources of financing and business prospects. It will also support entrepreneurs in the process of creating an arrangement and negotiations with creditors. In addition, it will advise on the introduction of possible organizational and financial changes to secure the company in the event of further disruptions.
Restructuring advisor It will therefore be like a doctor saving or healing companies. Importantly, the advisor who will take care of the company will be chosen by the debtor and creditors associated with the indebted company. This is a significant change introduced by the new act. Until now, the trustee or administrator was delegated by the court. The new order favors both the development of competition and the professionalization of the profession. Therefore, demand will verify the experience of advisors, and entrepreneurs will be able to use their services at their own discretion. Giving the advisors a commercial character will shape greater diligence in performing activities, which will have a positive impact on the market and will be a benefit to the beneficiaries of their services.
Working with the "patient"
The new law focuses on cooperation with the debtor and his creditors. The first concession in favor companies are given the right to choose a restructuring advisor. Milestone Another step is to increase the powers of the creditors' council, i.e. the body representing all the debtor's creditors.
Until now, the council was appointed at the request of the judge-commissioner, who delegated and dismissed its members. From next year, creditors will have a decisive influence on the council's activities, and thus on all restructuring steps taken. The council members will give their consent or reject the debtor's proposed actions. In addition, creditors will have the right to appeal against resolutions adopted by the council.
Under the new regulations, the council will be established creditors' motion, whose total receivables exceed 20 percent of the debtor's total receivables. It is also possible for a single creditor with more than 20 percent of total receivables to appoint a council. In this way, creditors will gain real influence on the restructuring proceedings and their final effect.
Funds for the "treatment" of companies
The New Restructuring Law is not only about new possibilities for diagnosing the problem and choosing the method of "treating" the company from "illnesses". It is also about real funds for treatment, including the admissibility of public aid and planned financing of restructuring. A new, integrated procedure for applying for aid has been introduced public in restructuring enterprises. Previously, many arrangements had not been concluded. Public and legal creditors voted against the arrangements, claiming that they violated the regulations on permitted public aid. Currently, during the proceedings before the vote, the nature of public aid and its admissibility will be assessed (private creditor and private investor tests) and, if necessary, at this stage it will be possible to apply for consent. In the absence of such consent, it will be possible to change the arrangement proposals and only then proceed to voting on them – which increases the chances of accepting and approving arrangements concluded in this way with creditors.
Indirect support financing of restructured companies is also to enable participation in public procurement procedures - which was currently impossible in the bankruptcy arrangement. Opening the path to contracts obtained through a tender is a forward-looking change that can significantly increase opportunities for restructured companies to survive and continue to compete in economic transactions.
Like a "Hospital Emergency Department" - that is, quickly and efficiently
As experience shows, deadlines determine the success of most restructuring proposals. For companies on the brink of bankruptcy, often even two days can determine the company's continued existence. Meanwhile, court procedures can take weeks. The new law is therefore designed primarily to streamline resolution procedures. Among other things, the time for the commercial court to initiate proceedings will be shortened. Similarly, the time limit for the preparation of a restructuring plan, the submission of which cannot exceed 30 days from the date of receipt of the restructuring application, will be shortened.
The new law also simplifies the formal requirements for the preparation and filing of an application to commence insolvency proceedings. To this end, it is planned to introduce standardised forms and, in the future, the possibility of electronic filing.
The legislator also took care to establish priority restructuring over bankruptcy. Therefore, it should be remembered that in the event of a conflict of applications, the application to initiate restructuring proceedings has priority, although this priority is not absolute.
The order in which creditors are to be satisfied will also be changed. In line with the new guarantees of respect for creditors' rights, preference for public-law receivables, including tax receivables, has been abolished. An exception is made for receivables from ZUS contributions for up to three years.
It is impossible to describe all the changes that will occur under the New Restructuring Law in a few sentences. It is worth emphasizing, however, that Polish companies they will finally get a chance to save their value and jobs, which will have a positive impact on the entire economy.
Hence, while congratulating everyone on the success of adopting the Restructuring Law, I appeal to the Ministries – the Ministry of Justice and the Ministry of Economy, but also the State Treasury and Finance – not to “rest on their laurels” and to continue their efforts aimed at effectively implementing restructuring procedures, financial and fiscal incentives that stimulate faster and more effective restructuring. restructuring of enterprises. It is crucial that they monitor the application of new regulations and ensure their improvement and education of entrepreneurs in this area.
We are left with promoting restructuring opportunities and trusting that the new rules will be properly implemented by the courts. Entrepreneurs also face a major challenge. It remains to be seen whether they will make use of the new rules and the knowledge and experience of restructuring advisers in advance, introducing resolution procedures at an early stage of the threat of insolvency - or whether they will continue to react only when in deep crisis.
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