Restructuring plan – what is it and what does it contain?

As Terry Pratchett wrote:If a person has a Plan, he is already halfway to his goal.”. Projection of intentions and actions within the framework of “healthy” activity allows for time optimization, improves management efficiency and streamlines processes. As practice shows, it is also of key importance for crisis management, which is why the restructuring plan is a fundamental document also in restructuring proceedings.

Contents:

What is a restructuring plan?

The restructuring plan is a document that is mandatory in each of the four types of restructuring proceedings. It plays a key role both for the entrepreneur as a kind of signpost to exit the crisis, but also for the broadly understood business environment, allowing for the assessment of the coherence of the concept of the company's recovery and the feasibility of the proposed method of realizing the rights of creditors. Reliable preparation of the document supported by a thorough internal and industry analysis, taking into account risk identification, is of key importance, because it directly translates into the effectiveness of the company's rescue process, the ability to conclude an arrangement and long-term financial stabilization.

What types of restructuring plans are there?

The Restructuring Law distinguishes two types of plans. 

The first of them – the preliminary restructuring plan is prepared at the stage of preparing the proceedings and is a mandatory element of the application to open accelerated arrangement proceedings, arrangement proceedings and remedial proceedings. The information contained in the document constitutes the basis for issuing a positive procedural decision on opening the proceedings. In turn, in proceedings for approval of the arrangement its preparation is one of the requirements for the announcement of the arrangement date, with which the law associates the effects of pre-enforcement protection. 
The second – "full”restructuring plan – is a comprehensive document defining the overall strategy of operations supported by forecasts and analysis of the company itself and the situation in the industry.

What is included in the preliminary restructuring plan and what is "full" restructuring plan

The preliminary restructuring plan should include at least:

• analysis of the causes of the debtor’s difficult economic situation,
• preliminary description and overview of planned restructuring measures and related costs,
• a preliminary timetable for the implementation of restructuring measures,
• the debtor's financial statement prepared as at a date falling within thirty days prior to the date of submission of the application, or an indication of the reasons for not attaching such a statement.

The restructuring plan should include at least:

• a description of the debtor’s enterprise, along with information on the current and future state of supply and demand in the market sector in which the enterprise operates,
• analysis of the causes of the debtor’s difficult economic situation,
• a presentation of the proposed future strategy for running the debtor’s business and information on the level and type of risk,
• full description and overview of planned restructuring measures and related costs,
• a timetable for the implementation of restructuring measures and the final deadline for implementing the restructuring plan,
• information on the production capacities of the debtor’s enterprise, in particular on their utilization and reduction,
• a description of the methods and sources of financing, including the use of available capital, the sale of assets to finance restructuring, the financial obligations of shareholders and third parties, in particular banks or other lenders, the amount of public aid granted and applied for, and de minimis aid or de minimis aid in agriculture or fisheries, and a demonstration of the need for it,
• projected profits and losses for the next five years based on at least two forecasts,
• names and surnames of persons responsible for the execution of the arrangement,
• names and surnames of the authors of the restructuring plan,
• date of preparation of the restructuring plan.

The Act uses the term "at least", which means that in justified cases the plan may be extended to include additional information. It may also be limited if, due to the size or nature of the debtor's enterprise, determining all of the information listed is not possible or is not necessary to assess the possibility of implementing the arrangement, and the legislator does not provide for the possibility of limiting the scope of the initial restructuring plan.

Restructuring plan as an interdisciplinary document

A restructuring plan is a document that covers many different disciplines, of which the most intuitive ones are law, finance and specialists according to industry characteristics. For this reason, at the preparation stage, in order to ensure reliability and, above all, feasibility based on the projection of properly selected actions, risk identification and feasible forecasting assumptions, the cooperation of specialists from various fields is extremely important. As already indicated, a well-prepared and prepared plan is primarily intended to help the entrepreneur himself in the effective implementation of remedial actions, but also to provide a basis for making decisions by his creditors. Its submissions must therefore be consistent in all areas and from the perspective of each recipient. It should be remembered that, for example, banks will place greater emphasis on financial data, and contractors on industry assumptions and forecasts - hence consistency must be ensured at every level. 

Who prepares the restructuring plan and when?

The answer to this question depends on the type of procedure and the function it involves. restructuring advisor. 

In the procedure for approval of the arrangement, the restructuring advisor acts as the arrangement supervisor and, in accordance with the Act, together with the debtor, draws up a restructuring plan. The document is an element of the report of the arrangement supervisor and is submitted to the Court by the debtor together with the application for approval of the arrangement, i.e. no later than 3 months from the arrangement date. Despite such a specified deadline, practice requires the document to be drawn up more quickly - before the creditors cast their votes - in order to enable them to assess the feasibility of the assumptions and the possibility of implementing the proposals submitted to them, as well as for the needs of public-law creditors, who are allowed to verify the existence and admissibility of public aid in the procedure and as part of the implementation of the arrangement. 

In accelerated arrangement proceedings and arrangement proceedings, the restructuring advisor acts as the arrangement supervisor and, in accordance with the Act, the preparation of a restructuring plan falls within his competence. The instructional deadline for preparing and submitting a document in accelerated arrangement proceedings is 2 weeks, and in arrangement proceedings 30 days. Practice shows that the indicated deadlines may prove insufficient in many cases, and the complexity of the debtor's business or planned activities require a longer analysis or the involvement of external entities.   

In the restructuring proceedings, the Administrator, in agreement with the debtor, submits a restructuring plan to the judge-commissioner within 30 days from the date of opening the restructuring proceedings, whereby in this type of proceedings, as they require the implementation of the most thorough measures, the legislator has provided in the act itself that this period may be extended to 3 months. 

The Act allows, in particularly justified cases, the possibility of a restructuring plan being drawn up by third parties, but the consent to commission the execution of the document must be issued in advance by the Judge-Commissioner.

Is the restructuring plan subject to approval?

The approval of the Restructuring Plan occurs only in the restructuring proceedings, which are made by the decision of the Judge-Commissioner after obtaining the opinion of the creditors' council. The Judge-Commissioner, taking into account the objectives of the restructuring proceedings, the issue of protecting the legitimate rights of creditors and third parties who are not participants in the proceedings, may also prohibit the implementation of certain actions or, on the contrary, order the implementation of others. In this type of proceedings, the Administrator, as a rule, implements the assumptions contained in the plan only after the approval of the document, the exception being actions aimed at restoring the debtor's ability to perform obligations, if the failure to take them immediately would significantly impede the possibility of achieving the objective of the proceedings. 

Can a restructuring plan be changed after approval?

In the event of a change in the material conditions or circumstances of the case, the legislator has expressly allowed for the possibility of modifying the restructuring plan. Material circumstances justifying a change in the plan include, among others, a modification of the proposed future strategy for running the enterprise, restructuring measures, the schedule for their implementation, or methods of financing the arrangement. The change requires repeating the procedure appropriate for creating the plan, which translates into an extension of the duration of the proceedings, hence the importance of full involvement at the stage of projection of the original document. The position is well-established in the literature that minor, insignificant corrections that do not affect the course of the proceedings do not require a change in the plan. 
Comprehensive restructuring plan preparation services are offered by the company PMR Restructuring SA., whose interdisciplinary team has prepared dozens of restructuring plans that have gained the approval of creditors and have been approved by courts throughout the country. The planned activities have contributed to the achievement of the objectives of the proceedings by numerous clients of the company from various industries - in case of interest, please contact us.

Marta Zarówna

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