Insolvency 11. mája 2020

Poland: Ministry of Justice announces simplified restructuring procedure

11. mája 2020
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Piotr Wojnar
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act legal Poland

In response to act BSWW’s request for legislative actions, the Ministry of Justice has announced that it is working on a simplified restructuring procedure for enterprises.

At the onset of the epidemic, act BSWW asked the Ministry of Justice to suspend the obligation to submit bankruptcy petitions. This solution was included in the Anti-Crisis Shield 2.0. However, it was somewhat different from our recommendations. Last Friday, we received an official response to our legislative suggestions. The Ministry explained why it had not decided to suspend the declaration of bankruptcy upon the creditor’s request in case the debtor’s insolvency is caused by COVID-19. The Ministry believes that the best way to ensure protection against the creditor’s motion for declaration of bankruptcy is the debtor’s submission of a restructuring application. In case of concurrence of the bankruptcy and restructuring petitions, the latter is generally considered to prevail. However, the situation is far from simple here.

Unfortunately, the current restructuring procedure is not adjusted to mass insolvencies that we are witnessing right now. Courts were not keeping pace with demand even before the epidemic, when the number of incoming petitions was usual. The period between the submission of a restructuring application and the opening of proceedings or the creditors’ meeting (aimed at voting on arrangement) was often so long that the company was losing the ability to perform the arrangement and was left with no other option than bankruptcy. If all enterprises suffering from financial difficulties submitted restructuring applications now, courts would get stuck for years. It would be advisable to simplify the regulations, making it possible for courts to open restructuring proceedings almost automatically. Also, the restructuring procedure is expensive and (subject to some exceptions) can be afforded primarily by large enterprises that have sufficient resources to pay the costs. In practice, the enterprise should have over PLN 100,000 assigned for costs alone. Of course, the exact amount depends on the specific circumstances of a given case. The fee of an administrator in remedial proceedings varies from approx. PLN 15,000 (extremely rare in practice) to over PLN 1 million. It is strongly recommended to introduce regulations minimizing those costs. Additionally, preparation of the restructuring application, all appendices and the initial restructuring plan is time-consuming and complicated. The procedure should be streamlined.

In its letter, the Ministry mentioned that it was working on legal amendments to make it possible to conduct restructuring procedures during the state of epidemic and over a limited period after its end, using a simplified procedure. This is very good news. What we need is a simple, quick and comprehensible procedure that would allow businesses to recover from the epidemic-induced crisis. Hopefully, the new regulations will indeed make restructuring procedures much more accessible.

Please feel free to contact us for any questions you might have.

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Piotr Wojnar
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act legal - BSWW legal & tax
O autoroch

Piotr Wojnar

Managing partner

Piotr specializes in commercial law, with a strong focus on assistance in corporate issues for public companies. He also has extensive litigation background within the areas of civil law, administrative law and criminal law. He has advised on numerous public and private share issues, incl. those of COMP S.A. and Bank BPS S.A. Piotr has piloted M&A transactions for listed companies (incl. Novitus S.A., ZUK S.A. and Elzab S.A.), participated in the establishment of brokerage houses and investment funds (incl. TMS S.A., Analizy Online Asset Management S.A., IFM S.A. and Opera TFI S.A.), as well as provided assistance with respect to their daily operations. He has been recommended in Capital Markets, Commercial, Corporate and M&A and White-Collar Crime by the Legal 500 EMEA 2020, one of the leading international legal directories. The white-collar crime practice, co-headed by Piotr, is considered by The Legal 500 EMEA to be among the elite of Polish law firms specialized in that area.

Barbara Szczepkowska

Partner

Her practice focuses on bankruptcy and restructuring proceedings regarding businesses, during which she represents creditors and debtors alike. Having advised receivers, court-appointed supervisors and administrators, she boasts vast experience in advising insolvency practitioners. During restructuring processes, she has drafted key documents addressed to bodies handling the proceedings, such as restructuring plans and arrangement viability opinions. She assisted in proceedings involving over 1500 creditors and PLN 500m in debt, advising clients on all the facets of the process, from the selection of best-suited type of restructuring proceedings, through petition drafting and the court’s approval of the arrangement. Moreover, Barbara offers support in pre-pack liquidation proceedings. Bankruptcy and restructuring proceedings have also been the focus of numerous legal opinions prepared by her. Barbara has successfully protected clients’ interests in a few dozen personal bankruptcy processes ending in the release of former business owners and management board members (among others) from their debts. One of her clients had a record-high debt of over PLN 90m. She also represents clients before courts in a variety of other cases, including ones regarding complex fraudulent transfer claims (also ones involving a receiver) and major damages recovery cases, e.g., against receivers in connection with damage caused by them in bankruptcy proceedings. She also handled litigation between a creditor and a receiver aiming to determine whether the transfer of the bankrupt’s patent rights to the receiver was ineffective vis à vis the bankruptcy estate, which she won following an appeal. Prior to joining act BSWW, Barbara worked for many years for Zimmerman i Wspólnicy.

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