Without prejudice to the observations under the heading “Impact on the management of contracts” and the derogatory measures enacted by the Government, notably, in what concerns “moratorium on loans”, or those aimed at the “maintenance of employment contracts”, there will be cases where, even under the present circumstances, resorting to legal mechanisms for debt restructuring is justified.

 

Are there any mechanisms of debt restructuring in case my company is facing a difficult economic situation?

The companies which, as a result of COVID-19 and the measures that have been implemented as a response to it, come to find themselves in a difficult economic situation (i.e. facing serious difficulties in timely fulfilling their obligations, namely due to a lack of liquidity or failure to obtain credit) or in an imminent situation of insolvency but are still susceptible of recovery, may resort to (i) judicial recovery proceedings such as PER - Special Revitalization Proceedings - or (ii) extrajudicial recovery proceedings such as RERE – Extrajudicial Company Recovery Scheme – as means to negotiate a recovery / restructuring agreement with their creditors, that will allow them to continue their business and avoid insolvency.
It is, in fact, advisable for companies faced with the impossibility of timely fulfilling their obligations to consider resorting to these mechanisms, which will allow them to avoid deepening their distressful financial situation even further, while safeguarding them from judicial suits or insolvency requests, launched by their creditors.

 

My company has already resorted to PER proceedings, but present circumstances do not allow it to comply with the approved restructuring plan. What can I do?

  • Should the restructuring plan have been sanctioned by the relevant court in the last 2 years, then, as a general rule, the company would be prevented from resorting to a new PER. However, if up until the moment the exceptional circumstances determined by the measures adopted as a response to COVID-19were verified, , the company complied with the relevant plan, resorting to another PER might be admissible, bearing in mind those exceptional circumstances that could not have been considered at the time the plan was discussed and agreed on.
  • If, on the other hand, the restructuring plan was sanctioned over 2 years ago, the possibility of resorting to a new PER is unequivocal, provided that the plan is being complied with or should this not be the case, only the current circumstances have determined its non-fulfilment. Otherwise, i.e. if the obligations arising from the plan were already being breached, the company may already be legally insolvent, and hence, filing for its insolvency should be considered.

 

Can I be bound to file for the company’s insolvency?

The company is in a state of insolvency when it is unable to fulfill its fallen due obligations or when its liabilities manifestly surpass its assets, valued in accordance with the applicable accounting rules.
In this case, management bodies are legally bound to file for the company’s insolvency within 30 (thirty) days from the date on which the insolvency status became known to them.
Notwithstanding, one of the measures enacted in response to COVID-19 has led to the suspension of the deadline for filing for insolvency, this suspension remaining in force until the end of the current exceptional situation.

 

Does the declaration of insolvency lead to the shutdown of my company?

No. Insolvency proceedings may indeed determine the liquidation of the company, but they may also lead to the approval by creditors and the Court of an insolvency plan capable of enabling the company to maintain its activity and fulfill its obligations. Moreover, if the company files for its own insolvency, it may even be permitted that its management bodies remain in office provided that an insolvency plan has been submitted - or is submitted within 30 days of the declaration of insolvency - and foresees for the continuity of the company's operations and does not result in delays in the proceedings or disadvantages for the creditors.

 

 

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This information is being updated on a regular basis.

All information contained herein and all opinions expressed are of a general nature and are not intended to substitute recourse to expert legal advice for the resolution of real cases.