by Oana Strătulă (Partner)
The present insolvency procedure regulated by the Law no. 85/2006 has become over time an instrument sometimes used in an abusive manner, by both debtors and creditors1.
Thus, debtors are being protected from creditors under the generous umbrella determined by the current law, given the fact that it is well known that once the proceedings are opened, any interests, penalties or increases can no longer be added to the existing claims and, moreover, all the actions implemented in order to achieve their claims against the debtor or his properties shall be suspended.
On the other hand, it is also true the fact that, on many occasions, creditors also make use of the insolvency procedure to put pressure on debtors to open the procedure, although the nonpayment of the claims is not due to the fact that the debtors are in insolvency. We can add to these shortcomings the fact that, under the current regulation, only a small number of companies manage to recover during the reorganization procedure and to get back in the competitive environment. This entails some negative consequences: creditors who will not see again their covered claims, lost jobs, potentially profitable businesses reaching bankruptcy.
Therefore, a new insolvency law is absolutely necessary. The business environment has many expectations from the future regulation which is included in the draft law on the insolvency procedure and on the proceedings for preventing insolvency.
To whom the new law addresses to
According to the new law, both the proceedings for preventing insolvency (the ad hoc mandate and the preventive concordat) as well as the insolvency procedure apply to professionals, defined by the Civil Code as all those who exploit an enterprise, and also to autonomous administrations.
Exploiting an enterprise refers to the systematic exercise made by one or more persons of an organized activity which consists in the production, administration or estrangement of goods or services, regardless of whether it is gainful or not.
The procedures regulated by the new Insolvency Law do not apply to professionals who practice free professions, nor to those to whom special provisions are stipulated regarding their insolvency regime and also not to preuniversity education units and to other entities mentioned in art. 7 of Ordinance no. 57/2002 on scientific research and technological development.
Exploiting an enterprise refers to the systematic exercise made by one or more persons of an organized activity which consists in the production, administration or estrangement of goods or services, regardless of whether it is gainful or not.
The procedures regulated by the new Insolvency Law do not apply to professionals who practice free professions, nor to those to whom special provisions are stipulated regarding their insolvency regime and also not to preuniversity education units and to other entities mentioned in art. 7 of Ordinance no. 57/2002 on scientific research and technological development.
A new threshold value for insolvency
According to the draft of the new legislation, the threshold value – meaning the minimum amount of the claims for which the application to open the insolvency proceedings can be introduced – is 40,000 RON for both creditors as well as for the debtor, for claims of any other nature than wages, and for employees shall be 6 gross average wages / per employee.
What are the procedures for preventing insolvency
The procedures for preventing insolvency apply to debtors in financial difficulty, meaning debtors who have a reduced degree of short-term liquidity and / or an increased indebtment degree on long-term, which can affect the fulfillment of contractual obligations through the resources generated from the operational activity or by the resources attracted through the financial activity.
The ad hoc mandate is a confidential procedure, initiated at the request of the debtor in financial difficulty through an ad-hoc representative appointed by the court, which negotiates with creditors in order to achieve an agreement between one or more of them and the debtor, in order to overcome the difficult situation in which they are.
The preventive concordat is a contract between the debtor in financial difficulty, on one hand, and creditors holding at least two thirds of the value of the claims accepted and uncontested, on the other hand. Through the preventive concordat, the debtor proposes a plan for recovering and achieving the claims of these creditors upon himself and the creditors agree to support the debtor’s efforts to overcome the difficulty in which they are.
The difference between the general insolvency procedure and the simplified procedure
The general insolvency procedure represents the procedure by which a debtor enters, after the observation period, in the judicial reorganization procedure and in the bankruptcy procedure or, separately, only in judicial reorganization or only in bankruptcy procedure.
The simplified procedure represents the procedure by which the debtor enters directly into the bankruptcy procedure or at the opening of the insolvency procedure or after an observation period of up to 20 days. In the simplified procedure may enter only certain categories of debtors such as: professional individuals subject to registration in the trade register, with the exception of professionals who practice free professions; family enterprises; dissolved legal entities; debtors who declared through the introductory request their intention to enter bankruptcy, debtors who meet one of the following conditions: do not have any goods in their patrimony, the constitutive documents or the accounting documents can not be found, the administrator can not be found, the headquarters no longer exists or does not match the address from the the Trade Register.
The sensitive points of the new regulation
Currently, the fate of the draft law on the prevention of insolvency proceedings and insolvency is uncertain, given the fact that it was rejected by the Senate in its meeting of February 25, 2014. However, to the extent that the draft law would be passed by the Chamber of Deputies in its current form, this includes a series of provisions whose implementation could lead to serious problems in the future.
Thus, for example, the new draft law allows the forced execution of claims that arose after the opening date of the insolvency procedure, if the debtor fails to pay them within 90 days of the due date. Or, the possibility offered by the new law to execute the current claims can give rise to unfair situations in which creditors enrolled in table and whose claims are, by hypothesis, prior to the opening of the procedure, will see their claims covered only to the extent that the current claims are met, although they are newer.
Also, as well as the current regulation, the new draft law does not establish objective criteria that can be verified regarding the appointment by the syndic judge of the provisory judicial administrator or the judicial liquidator, which may raise questions about the transparency of the appointment.
Another example is that another provision of the new draft law, which can lessen the odds of reorganizing, refers to a one-year plan of reorganization, which may be entirely insufficient for the fulfillment of the measures proposed in the plan.
In conclusion, although it is beyond any doubt that a new insolvency law is necessary, it remains to be seen to what extent this will be able to meet the requirements of all those involved, especially the main actors, respectively debtors and creditors.
1. This is a translation of the article published on March 11, 2014 in Business24.ro. For the Romanian
original text, please visit this link: http://www.business24.ro/legislatie/stiri-legislatie/editorial-avocat-oana-stratula-noua-lege-a-insolventei-plusuri-si-minusuri-1542751