Notice: Array to string conversion in /home/html/actlegal.com/public_html/wp-content/themes/actlegal/single.php on line 49

Insolvency 11 May 2020

Poland: Ministry of Justice announces simplified restructuring procedure

COVID -19 Legal Alert
11 May 2020
|
Piotr Wojnar
|
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.

|
Piotr Wojnar
|
act legal Europe - BSWW Legal & Tax

„This Alert is a source of general information for clients and friends of act legal. Its content should not be construed as legal advice, and readers should not act upon the information in this Alert without consulting our lawyers.“

About the authors

Piotr Wojnar

Managing partner

Barbara Szczepkowska

Attorney at law

Barbara consults on bankruptcy and restructuring law. Her expertise also covers civil and commercial litigation.

About act legal Poland - BSWW Legal & Tax:

Superior quality, competitive service by yielding small teams oriented solutions tailored to the specific needs of clients.

Piotr Wojnar

Managing partner
act legal Poland BSWW Legal & Tax Warsaw, Poland
Phone: +48 22 420 59 59

Barbara Szczepkowska

Attorney at law
act legal Poland BSWW Legal & Tax Warsaw, Poland
Phone: +48 22 420 59 59
News and updates on legal implications for companies: Add to favorites

Topics

Countries