Question of the day

An undertaking in financial difficulties may opt for restructuring procedureThe purpose of which is to avoid the bankruptcy of debtors when there is still a chance of dealing with difficulties. The conditions for the application of the restructuring procedure and its effects are regulated in Insolvency Law No 149/2012.

In restructuring proceedings the debtor is to submit a restructuring plan effective to demonstrate the beneficial results of the restructuring process to its creditors, thus avoiding bankruptcy proceedings. Therefore, if the debtor convince its creditors to approve a restructuring plan, the implementation of that procedure is to give the ailing business sufficient to deal with the financial obstacles that have arisen.

Restructuring proceedings are initiated at the request of debtors by the courts, who are intended to support debtors (e.g. by suspending individual debt enforcements or the cleaner of accrued interest).

In particular, a debtor may choose to apply a accelerated restructuring proceduresthe fastest method of restructuring procedures. It is governed by Insolvency Law No 149/2012, which has been substantially amended by Law 141/2020 (in force since 14 September 2020).

The proposed model, based on the international concept of “pre-negotiated plan”, consists of the following:

(I) the undertaking in financial difficulty can prevent insolvency by negotiating a extra-judicial restructuring plan with all or some of the affected creditors before making an application for insolvency in court;

(II) only creditors whose claims will change (long time, reduce, etc.) are invited to negotiate the restructuring plan (however, the other creditors are still to be paid in accordance with the arrangements with them);

(III) during the negotiations (maximum 2 months), at the request of the debtor, the court may stays of enforcement individual and the obligation to lodge an application for insolvency proceedings. At this stage, the debtor also has the right to request the court to appoint a provisional administrator that could assist in the negotiation process with creditors;

Bene note:

The provisional administrator is a person appointed by the insolvency court whose main obligation is to administer and/or supervise the debtor’s business during insolvency (restructuring). Pending appointment by the court, the debtor is entitled to propose his application for the position as a provisional administrator, chosen from the list of authorised administrators:

http://www.uaam.md/about-uaam-2/auth-admins-2

During the appointment of the provisional administrator, the ordinary manager of the company (the Director) continues to direct the company and is supervised by the provisional administrator (unless he or she is not deprived of the right of administration).

(IV) if, following extra-judicial negotiations, the affected debtor and creditors reach a common position on the restructuring plan, the debtor is to submit an application to the insolvency court to initiate accelerated restructuring proceedings. The court then initiates accelerated restructuring proceedings where creditors have to vote and approve the restructuring plan;

(V) with the opening of restructuring proceedings, the insolvency court appoints a provisional administrator (where he has not already been appointed at the request of the debtor, under point (iii) supra), whose main obligation is to prepare an independent report exposing itself to the real possibility of the debtor to implement the proposed restructuring plan. The provisional administrator shall have the right to manage the debtor’s business until the restructuring plan has been confirmed by the insolvency court. He/she may then be entitled to supervise the execution of the restructuring plan. The ordinary manager of the company (the Director) may continue after his normal business activities under the conditions laid down in the restructuring plan.

Bene note:

If the debtor fails to implement the approved restructuring plan within the time limits set out therein, any creditor is entitled to apply to the insolvency court to open bankruptcy proceedings and liquidate the debtor (see Q26 below).

Source: Extract from the publication ‘Emergency Legal Advice to SMEs’ prepared by the Economic Council to the Prime Minister and supported by the EBRD’s Impact Fund for Small Business.