Bucharest, May 12, 2020 – The establishment of the state of alert and the resumption of economic activity starting with May 15 brings new legislative changes, this time in the field of company restructuring. Specialists of CITR, leader of the insolvency market in Romania, analyze the measures and identify the benefits they bring for companies. Yesterday, the Government of Romania approved a number of measures amending the Law No. 85/2014 on insolvency prevention and insolvency proceedings. These measures will be proposed for adoption by the Parliament, and subsequently the adopted form will be published in the Official Journal. The amendments provide for the suspension and extension of certain deadlines (such as for submitting reorganization plans), for facilitating the activity of companies in pre-insolvency proceedings (arrangement with creditors) and insolvency (observation and reorganization).
”Through these amendments proposed by the Romanian Government, both necessary and awaited, we join other European states, such as Austria, Belgium, Spain, France, Italy and Bulgaria, which successfully provide a safety net for companies the economy relies on. For insolvent companies, this period we are going through is particularly difficult, as the COVID-19 crisis and its effects double their pre-existing difficulties. We encourage the legislative authorities involved in the amendment of the insolvency law to act with openness and rapidity to adopt the proposed measures in due time and we assure them that our experience confirms the fact that both the postponement and extension, as well the suspension of the announced deadlines, are measures requested and necessary for insolvent companies”, points out Andra Olar-Caragea, CEO of CITR.
Measures for pre-insolvency and arrangements with creditors
In the case of companies in an arrangements with creditors, the period when the negotiations on the draft arrangement with creditors are carried out is extended by 60 days. Moreover, the period of drafting the offer for the arrangement procedure and negotiation thereof are modified, each with 60 days. Government extends by further two months the period necessary to pay the debts, granting companies time to manage the crisis caused by the COVID-19 pandemic.
According to the amendments, the obligation to submit the application for insolvency by the debtor within 30 days of the occurrence of the state of insolvency is suspended during the state of alert and for further 30 days after its cessation. Companies in difficulty will be able to analyze in this time the possibilities of business recovery, chances of returning to the market and prospects for paying the outstanding debts. If they find that the state of difficulty continues to persist, they will be required to submit the application for protection under the insolvency law.
At the same time, in case of companies that interrupted in whole or in part their activity as an effect of authorities; decisions during the state of emergency and the state of alert, creditors may lodge the application for insolvency of debtor companies only after the reasonable attempt to conclude a payment agreement. "We notice an emphasis on the amicable management, by negotiation, of the creditor-debtor relation, a step forward towards achieving the legislative adjustments imposed by the EU Directive on preventive restructuring frameworks, which must be implemented at Community level by July 2021. We are waiting for, and it is absolutely necessary, a second wave of measures to supplement an economic support package for these companies", said Cristina Ienciu-Dragoș, Head of Legal CITR and Country Coordinator Insol Europe - a European organization of specialists in insolvency and restructuring..
The threshold value representing the minimum amount of the claim for opening insolvency increases from RON 40,000 to RON 50,000 for companies that interrupted their activity in whole or in part as an effect of decisions related to the state of emergency, diminishing the number of companies required to access insolvency in this period. One of the benefits of opening the insolvency proceedings, which continue to apply during the state of alert, is the suspension of enforcement against the company. And after opening the insolvency proceedings companies will benefit from a respite in which they will be able to design, together with the insolvency administrator, a reorganization plan.
Reorganization and business recovery procedure
Regarding companies that have recently become insolvent, they benefit from an extension by three months of the observation period, the deadline for submitting reorganization plans being extended.
For companies that submitted a reorganization plan and it was not confirmed, but whose recovery prospects have changed as a result of the effects of the COVID-19 pandemic, they may submit, within three months of the entry into force of this law, a modified reorganization plan, provided that they notify the intention to creditors within 15 days of the effective date of this law.
At the same time, for insolvent companies whose activity was interrupted in whole or in part as a result of decisions of public authorities and which were carrying out their activity according to a reorganization plan, they may request the syndic judge, within 30 days, to suspend the operation of the reorganization plan for two months and even extend the period of operation of the reorganization plan, but without exceeding the duration of 5 years.
The provisions, sent for approval to the Parliament of Romania, are expected to enter into force as of the date of establishing the state of alert. The previous measures adopted to support the business environment were applied only partially to insolvent companies, these operating under the spectrum of special, restrictive regulations, within the Law no. 85/2014 on insolvency prevention and insolvency proceedings. The measures that were not applicable to insolvent companies included: access to financing for SMEs and postponing the payment of installments.