Poland: Simplified restructuring proceedings
How to survive epidemic
As of 13 April 2020, deadlines to file for insolvency ceased to run. This “insolvency moratorium” is to last until the state of epidemic is lifted. Obviously, the purpose of the moratorium is by no means to force entrepreneurs to wait passively for the end of the epidemic. The key focus here is on restructuring.
It is common knowledge that court restructuring proceedings are quite complicated and formalized. Simplified restructuring proceedings, introduced in the Polish Anti-Crisis Shield 4.0, offer a solution aimed at facilitating settlement with creditors by protecting businesses from enforcement and by limiting courts’ involvement.
These simplified proceedings are not completely new. They combine elements of the existing out-of-court arrangement proceedings, “accelerated proceedings” and partial settlement. However, these types of proceedings have not yet functioned satisfactorily in legal practice, mainly due to creditors’ reluctance to enter into out-of-court settlements.
The recipe for simplified restructuring seems to be easy:
- enter into an agreement with a restructuring advisor;
- draw up a list of your creditors and settlement proposals;
- make a public announcement;
- notify the relevant court;
- use the four-month period to negotiate with your creditors and have them vote on the settlement;
- ask the court to approve the settlement.
Creditors may not be enthusiastic about simplified restructuring because:
- enforcement proceedings are suspended;
- the debtor stops performing his obligations;
- landlords are not permitted to terminate leases;
- if the debtor proposes full repayment of secured creditors, their claims are subject to the settlement even without their consent.
The provisions on simplified restructuring entered into force on 24 June 2020. The Court and Economic Monitor already lists dozens of announcements of these proceedings, which is a sign that the law is in fact being applied in practice. The first proceedings are expected to be completed this year.
If one of your debtors makes such an announcement and you are not sure how to react, or if you are considering initiating simplified restructuring proceedings yourself, we are ready to support you. The simplified restructuring is available to debtors until 30 June 2021.
Any questions? Please contact: Wojciech Wasowicz
Practice group: Restructuring & Insolvency