Recent legislative amendments to insolvency – Law No. 216/2022 has amended the insolvency Law No. 85/2014 to comply with EU Directive No. 2019/1.023 concerning restructuring and insolvency.
The main target of the new law is to expand and regulate the procedures for the treatment of a company in difficulty before the insolvency procedure. There are two alternative procedures: the restructuring agreement and the preventive convention.
The state of difficulty means the assessment of a future disfunction of paying the due obligations, unless necessary measures are taken in advance. The restructuring procedures enacted by the new law concern the companies in difficulty, not in insolvency. As a reminder, the insolvency means the nonfulfilling of a due payment after 60 days from the due date. The new law kept the same amount of the level of the not paid claim of RON 50,000 (approx. EUR 10,000).
Regarding the two alternative procedures, both are managed by an insolvency practitioner who – as a general rule – acts under the supervision of the court. By exception, in case the debtor’s turnover is below EUR 500,000 and the restructuring agreement is approved unanimously by creditors, the procedure skips the court stage. Under these conditions, the restructuring agreement is enough to be approved by the insolvency practitioner.
In both procedures the insolvency practitioner assigned by the debtor by way of a contract is empowered to assist the debtor in the negotiations with the creditors or – based on the debtor’s assignment – to negotiate with the creditors the restructuring agreement.
The procedure of the restructuring agreement can only be initiated by the debtor. Beside the debtor, the preventive convention procedure can also be initiated by the creditors, but only based on a preliminary consent of the debtor. In this case, the insolvency practitioner will be still appointed by the debtor.
The procedure of the restructuring agreement is basically conducted by the insolvency practitioner. After the insolvency practitioner collects the votes of the creditors based on certain rules, the court is vested to confirm the restructuring agreement. The creditors are split into two main categories: those concerned by any alteration of their claims and those that are not concerned by the restructuring agreement. The first category is subject to express a vote upon the restructuring agreement whilst the restructuring agreement cannot produce any effect towards the claims of the second category. In practice, the negotiation of the restructuring agreement should include all the creditors to prevent the possible forced execution procedures that might be initiated by the creditors left outside by the restructuring agreement.
The procedure of the preventive convention starts by the court’s appointment of the insolvency practitioner who will manage the procedure. Such procedure will lead to the confirmation of the restructuring plan, subject to be awarded by the court. A new element of the law is that the creditors can hold official meetings without the attendance of the debtor. The duration of the restructuring plan is 48 months from its confirmation and it can be prolonged with another 12 months. In the first year minimum 10% of the total value of the claims mentioned in the preventive convention must be paid (the previous form of the law provided 20%).
Another new element of the law concerns the insolvency procedure: the judicial reorganization plan can unfold during a 4-year period of time (as opposed to 3 years in the previous regulation); the electronic means of communications may officially be used as regards the meetings of the creditors and the communications between parties involved; also, procedural rules of communication of trial documents (appeals, statements of defense) between the opponents have been introduced to determine a faster settlement of the trials attached to the insolvency procedure.