Implementation of the Restructuring Directive – one more chance for companies

On 14 July 2022, it has been promulgated the long-awaited Law amending and supplementing Law no. 85/2014 on insolvency prevention and insolvency proceedings and other normative acts, and the next day, on 15 July 2022, it was published in the Official Gazette of Romania, Part I, no. 709/2022.

This amendment transposes the Restructuring and Insolvency Directive (EU) 2019/1023, which aims to harmonise Member States’ legislation in the field of restructuring, increase the chances of companies, especially SMEs, to restructure, create efficient frameworks for preventive restructuring, insolvency and debt write-offs (waiver/dismissal) and reduce the costs of proceedings, maximising the recovery of claims.

Key aspects in changing the logic of insolvency proceedings:

  • The restructuring agreement will be drafted by the restructuring specialist, then negotiated and voted by the creditors, and confirmed by the insolvency judge. The arrangement with creditors will involve a request for the opening of proceedings, with immediate effect to suspend enforcement, then the drafting of a restructuring plan, its negotiation and vote by the creditors, and its subsequent approval by the insolvency judge.
  • A customised approach depending on the context of each company and the degree of difficulty, with the presumptions of difficulty being analysed by a restructuring specialist through a distress report.
  • Access to a reorganisation procedure will also be possible for individual entrepreneurs, opening the way to the restructuring of their claims and their economic reintegration, similar to a company organised under the terms of Law 31/1990.
  • Debts from the day-to-day activities of an individual, which cannot be reasonably separated from debts arising from the operation of a business, will also be dealt with in the insolvency proceedings of the professional.
  • Streamlining of restructuring procedures, i.e., streamlining of the voting procedure, of the objection/appeal procedure in order to implement the restructuring plan in the shortest possible time, e.g., obligation to communicate (not to receive) objections against the preliminary schedule of claims and other parties involved within the same time limit within which the objections have to be lodged, under penalty of their rejection as untimely lodged.
  • A simplified Restructuring Agreement procedure, in which the syndic judge is involved only if there are challenges.
  • Improved process for sending documents through the court, using electronic means of communication.
  • Balance between the rights of creditors and the protection of the company in difficulty, which is achieved through the fair treatment of claims proposed to be included in the plan, e.g., priority for payment of insolvency funding.

In general, companies in Romania were postponing insolvency for about 3-4 years for fear of failure, of the difficulties they faced in financing a new business, of the stigma of such a procedure, so this behaviour only discouraged the recovery rate and increased the costs of such recoveries. Thus, it can be said that the changes in legislation brought by the Law on the Restructuring of Insolvency Proceedings, as well as the wider presentation of the advantages of these procedures, will lead to a positive development in terms of saving as many companies as possible.

RTPR’s team of restructuring specialists assists both in the pre-judicial phase, in negotiating restructuring agreements, as well as before the specialised courts.

 

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