Difficulties in paying back debts do not always have to lead to bankruptcy. Restructuring proceedings in Poland may be a good solution. What is it about? How can it prevent bankruptcy? You will find the answers to these and other questions in this article.
Table of Contents
- What is a restructuring proceeding in Poland?
- Who can benefit from restructuring proceedings in Poland?
- Restructuring proceedings in Poland and the status of the entrepreneur
- Restructuring proceedings in Poland and insolvency of the debtor
- Types of restructuring proceedings in Poland
- Arrangement approval proceeding – what is it?
- Accelerated arrangement proceedings – what is it?
- Arrangement proceeding – what is it?
- Remedial proceeding – what is it?
What is a restructuring proceeding in Poland?
A restructuring proceeding is an opportunity to save the business from bankruptcy. It provides a possibility to mitigate the effects of losing liquidity. It also allows for finding a compromise with creditors, while protecting their rights.
As a result, the debtor makes an agreement with the creditors about the repayment of liabilities. All further activities are based on a restructuring plan. It should define restructuring measures, related costs and a schedule for their implementation.
Among the possible measures a debtor may propose, there are:
- postponement of performance of the liabilities,
- spreading out payments for the debt into instalments,
- reducing the value of liabilities,
- conversion of debt into shares or stocks,
- change, replacement or revocation of the right that secures a specific debt.
In court, a restructuring application has precedence over a bankruptcy petition.
Who can benefit from restructuring proceedings in Poland?
The necessary conditions to start restructuring proceedings are as follows:
- the debtor must have a status of an entrepreneur,
- there occurs an insolvency or probability of insolvency.
Restructuring proceedings in Poland and the status of the entrepreneur
A debtor has the status of an entrepreneur if he conducts a business or professional activity on his own.
Restructuring procedure is also available for the following entities:
- limited liability companies,
- simple joint-stock company
- joint-stock companies that do not conduct business activities,
- partners in commercial partnerships who are liable for the company’s obligations with all their assets,
- partners in professional partnerships,
Restructuring proceedings in Poland and insolvency of the debtor
First of all, a restructuring proceeding is a solution for insolvent debtors. A debtor is insolvent if he has lost the ability to perform his due cash liabilities. In Polish law, there is a presumption that a debtor lost this ability if the delay in performance of liabilities exceeds three months.
Yet, restructuring proceedings can also be conducted against a debtor threatened with insolvency. Namely, the one that may soon become insolvent.
Types of restructuring proceedings in Poland
The debtor may take restructuring measures in the form of:
- arrangement approval proceedings
- accelerated arrangement proceedings
- arrangement proceedings
- remedial proceedings
It is up to the debtor to decide what form of restructuring to choose.
Arrangement approval proceeding – what is it?
Under the arrangement approval proceeding, the debtor may enter into an arrangement with his creditors. This can happen without the involvement of a court. It may take place if the sum of disputed claims doesn’t exceed 15% of the total sum of all claims which give the right to vote on the arrangement.
The debtor must conclude an agreement with a restructuring advisor. The advisor must meet the requirements specified in the Act. He will act as a supervisor of the arrangement. His duties will include the preparation of arrangement proposals for creditors. In voting on the arrangement, the debtor collects the votes of the creditors by himself.
Accelerated arrangement proceedings – what is it?
This proceeding may be conducted if the sum of disputed claims doesn’t exceed 15% of the sum of claims which give the right to vote on the arrangement.
In this case, a debtor may enter into an arrangement with creditors. This can happen after the preparation and approval of a table of claims under a simplified procedure. The court decides whether to start proceedings on the basis of the documents attached to the application. If there is a decision to start proceedings, the court appoints the supervisor. The court supervisor has two weeks to prepare the necessary restructuring documents.
Previous enforcement proceedings on the claims covered by the arrangement are usually suspended.
Arrangement proceeding – what is it?
This type of restructuring procedure enables the debtor to enter into an arrangement with creditors after the table of claims has been prepared and approved.
As in the two previous types, arrangement proceedings are conducted if the sum of disputed claims exceeds 15% of the sum of claims which give a right to vote on the arrangement.
The initiation of arrangement proceedings suspends the enforcement proceedings connected with the claims under the arrangement.
Remedial proceeding – what is it?
Remedial proceedings are based on actions aimed at improving the debtor’s situation. They protect him from execution. The debtor may enter into an arrangement with creditors and perform remedial operations. Yet, this is possible only after the table of claims has been prepared and approved. What is more, in remedial proceedings, the debtor may use solutions that are not standard arrangement proposals. For instance, he may withdraw from a contract that is not profitable, even if the contract does not provide it.
Remedial proceeding gives the debtor extensive protection from execution. On the day of its opening, the assets used to run the business (and that belong to the debtor) become a remedial estate. Enforcement proceedings concerning items included in the remedial estate shall be suspended on the day of opening the remedial proceeding.
The effective restructuring will allow you to regain liquidity and avoid bankruptcy. In this rather complicated process, it is worth using the help of experienced specialists. Professionals from our law firm have many years of experience in this field. We encourage you to contact us!