For a long time now, a multitude of entrepreneurs have been taking steps to rebuild their businesses, which have been negatively affected by the pandemic. Dialogues with creditors or securing additional sources of financing are just some of the ways to stop the negative trends of the economic crisis. However, what if even these measures do not help? A way out of the difficult financial situation of a company may be the following restructuringwhich in times of pandemic has become particularly prominent.
In today's article I will deal with a discussion of the simplified restructuring procedure, which were introduced on the basis of the so-called Crisis Shield 4.0. Practice has shown that entrepreneurs exceptionally often choose this type of restructuring, so it is worth taking a closer look at its regulations and undeniable advantages.
I invite you to read on.
Is restructuring in the age of pandemonium a good solution for my business?
The effects of a pandemic manifest themselves in a variety of ways. Among the most common problems faced by entrepreneurs are persistently low financial results or payment bottlenecks resulting from the economic crisis. It would seem that things are slowly returning to normal. However, it is worth remembering that in many industries the situation is still precarious. Despite the support that some entrepreneurs have received under the crisis shield, many have had to close their businesses. Those of them who are still struggling to survive are often left in a very difficult situation.
Is there anything they can do in such a situation? Is fighting the insolvency of one's own business too risky in this age of pandemonium? Understandably, business owners are apprehensive about taking legal steps. Perhaps knowledge of the institution of restructuring will help to dispel many doubts.
Who can apply for corporate restructuring?
The important point is that any entrepreneur at risk of insolvency can benefit from restructuring. Whether or not its difficult financial situation is due to a pandemic crisis remains irrelevant.
However, how does the law characterise the concept of insolvency?
In accordance with Article 11 of the Insolvency Law:
"A debtor is insolvent if he has lost the ability to perform his due monetary obligations. A debtor is presumed to have lost the ability to perform his or her due pecuniary obligations if the delay in the performance of the pecuniary obligations exceeds three months."
Simplified restructuring procedure
The simplified restructuring procedure has been extremely popular with entrepreneurs since it was introduced. Its purpose - as with the other forms of this procedure - is to negotiate an arrangement with creditors to repay their debts. So what do business owners appreciate this form of restructuring for?
- The proceedings take place largely without court involvement.
- The entrepreneur decides when he wants to open proceedings.
- By opening simplified restructuring proceedings, the debtor is protected:
- before the actions of creditors (from the date of the notice of the opening of proceedings until the date of their completion or discontinuance, enforcement proceedings against the debtor are suspended and new ones cannot be initiated),
- key contracts (e.g. a lease, rental agreement or bank account) may not be terminated by the debtor.
In order to make use of the institution of simplified restructuring proceedings, we should first start by looking for an appropriate advisor who will take care of the formalities. It will be necessary to draw up a list of claims and disputed claims, prepare arrangement proposals or draw up a creditors' repayment plan. Such an advisor can also help us negotiate with creditors, which takes place before the case goes to court. Only after the arrangement has been approved by the creditors should an application for approval of the arrangement be filed with the court. Once the decision on its enforceability is issued, the provisions of the arrangement, i.e. repayment of the creditors, should follow.
Attention!
If the court does not receive an application for approval of the arrangement before the expiry of the 4-month period from the opening of the proceedings, the proceedings shall be discontinued by operation of law.
Major changes to corporate restructuring from 2022
It was originally envisaged that the simplified restructuring procedure would be available to entrepreneurs for a limited period of time - first until June 2021, but after thorough consultations the deadline was extended to the end of November. However, due to the great interest in this form of fighting company insolvency, the legislator decided to completely amend the restructuring provisions. As of 1 December 2021, regulations will enter into force that fundamentally change the procedure for approval of an arrangement. Thus, they will make it possible to use the so-called simplified restructuring procedure without any time limitations.
Restructuring in an era of pandemics - executive summary
Successful restructuring depends first and foremost on a swift and adequate response to the company's deteriorating situation. It is also important to select the right tools to carry out this complex process and to choose a logical plan of action to achieve the desired goal.
If you want to learn more about the restructuring process, read this article: Judicial (reorganisation) restructuring of a company
