Poland: Short guide on how to surive the pandemic
What to do if your company faces financial problems?
- start discussions with creditors to renegotiate terms, e.g. by extending payment deadlines
- in the event that the negotiations with the business partners fail, consider submitting a restructuring application to the court;
- where the relevant conditions are met and it is not possible to open restructuring proceedings, file for bankruptcy within the statutory deadline (subject to its possible extension as part of the government’s anti-crisis measures).
What does restructuring consist in?
- restructuring proceedings are (i) a mechanism for gradually solving a company’s financial problems, but also (ii) releasing members of the management board from liability for not filing an application for bankruptcy (important: the obligation to file an application for bankruptcy ceases at the opening of restructuring proceedings, not at the moment of filing the restructuring application itself);
- restructuring proceedings are conducted with the participation of the court and lead to an arrangement with creditors;
- four types of restructuring proceedings exist: (i) arrangement approval proceedings; (ii) accelerated arrangement proceedings; (iii) arrangement proceedings; and (iv) remedial proceedings.
What are the benefits of restructuring?
- protection against regular enforcement proceedings; its degree depends on the type of proceedings chosen;
- relief for the debtor in servicing its debt;
- possibility to terminate reciprocal agreements in certain cases.
What can be negotiated in restructuring proceedings?
- deferment of payment;
- the reduction of obligations;
- repayment in instalments;
- additional security from the debtor;
- additional financing by one or more creditors.
Who can benefit from the various types of restructuring proceedings?
- A professional debtor who is well aware of his financial situation and whose difficulties in meeting his obligations are not very serious - arrangement approval proceedings:
(i) the most flexible;
(ii) the fastest;
(iii) requiring the involvement of the debtor at the stage of negotiating the arrangement with creditors.
- A debtor with serious difficulties in fulfilling its obligations - remedial proceedings:
(i) the most formal and restrictive;
(ii) the most court involvement;
(iii) the debtor is generally deprived of the management of its business;
(iv) full protection against enforcement;
(v) the possibility to terminate reciprocal agreements with counterparties.
What else to keep in mind when your company faces financial problems?
- planned legislation provides for the suspension of the deadline for filing an application for bankruptcy, which means more time for the entrepreneur to assess the situation and take remedial action;
- however, the suspension will not apply to those businesses which were al-ready in serious financial difficulties before the COVID-19 outbreak;
- the solutions introduced and planned by the government do not provide for the suspension of enforcement proceedings.
– Any questions? Please do not hesitate to contact us!