Implementing the Restructuring Directive in Poland

High popularity of the procedure

The simplified restructuring procedure, introduced by a law to act against the negative effects of the COVID-19 pandemic, has proven to be the restructuring procedure that is most interesting for Polish entrepreneurs with financial difficulties. Originally, the possibility of initiating the proceedings was limited until the end of June, then the end of November 2021. Since the procedure was an excellent test area prior to the implementation of the restructuring directive, the legislature now intends to maintain it without a deadline by changing the existing regulations on the ordinary procedure for the approval of a settlement.

Many privileges for the debtor

The simplified restructuring proceedings are characterised by a minimum degree of judicial participation and, at the same time, very extensive protection for the debtor against enforcement by creditors. It can be utilised by any company that is been threatened with insolvency or has even become insolvent. The initiation of the procedure only requires the conclusion of a contract with a restructuring consultant and an announcement in the official government gazette. It is not linked to the consent of the restructuring court.

From the day of the announcement, the debtor has four months to file the application for approval of the settlement. During this time, he must convince his creditors to agree to the settlement. Otherwise, the proceedings will be terminated by law. This is a relatively short period of time, but practice shows that the percentage of agreements concluded in this procedure is quite high.

There are a number of privileges available to the debtor during the proceedings. First and foremost, all enforcement proceedings already initiated or conducted against him, including proceedings with regard to claims secured by a mortgage or a lien, are suspended. New enforcement proceedings may not be initiated. The termination by the landlord or lessor of the rental or lease agreement for business premises or real estate in which the debtor operates its company is not permitted. The prohibition of termination also applies to asset insurance policies and credit, leasing, bank account, and licensing contracts, as well as guarantees and letters of credit. The debtor is still entitled to conduct the ongoing business of his company. The consent of the restructuring consultant must only be obtained for decisions that go beyond the scope of normal business operations.

Possible flaw of the new law

According to the currently applicable regulations on the simplified restructuring procedure, during the procedure the debtor is also not obliged to satisfy the claims falling under the restructuring settlement. However, in the draft law, which is also supposed to retain this type of procedure after 30.11.2021, such relief is not provided for the debtor. The lack of a corresponding regulation, i.e. the lack of a moratorium for the debtor to repay creditor liabilities can unfortunately prove to be fatal for the form of restructuring discussed, since this means that the debtors would have to pay their claims on an ongoing basis, even those that are covered by the settlement, and would only be able to withhold the payments after the conclusion of the settlement. The procedure would therefore not even give the debtor any "breathing space" during the crisis, although this is precisely where the main advantage of all preventive restructuring procedures is seen.