The small and middle-sized companies (“SMEs”) are usually involved in a chain business relationship. Their flourishing from the past years has been a sign that the economy went on a healthy direction. Nowadays, given the economic effects of the COVID-19 crisis, the financial distress of the SMEs may cause negative chain reaction. It is important to underline the efforts of supporting the SMEs to keep doing business and to avoid entering into insolvency.

Prior Governmental Approach on SMEs

In 2017 the Government issued the Emergency Ordinance No. 110 regarding the Program of sustaining the SMEs, named IMM INVEST ROMÂNIA, published in the Official Journal on December 27, 2017 (“GEO 110/2017”). The Program mainly consisted of granting State guaranteed financing amounting up to RON 10 million to each beneficiary.

According to the Preamble of this GEO 110/2017, 99.7% of the Romanian companies are SMEs; they contribute with approximate 60% to the GDP and hire 60% of the labor force. It was also noted that the market tendencies reflected a decrease in the number of insolvency cases, reduction of the credit risk, and improvement of the payment discipline.

On such grounds, the Government decided that the SMEs deserved financial support. Such support did not come at that time, because the issuance of the methodological norms for the appliance of GEO 110/2017was delayed.

Approach on SMEs during the pandemics

The delay of enacting the methodological norms for the appliance of GEO 110/2017 lasted until the COVID-19 crisis struck. In April, GEO 110/2017 was amended by Government Emergency Ordinance No. 42/2020 (“GEO 42/2020”), and the methodological norms issued.

According to the Preamble of GEO 42/2020, the solvability of the companies of all kinds might be severely affected in the exceptional circumstances generated by the pandemic disease. Moreover, the SMEs are the special target of such lack of liquidity and this fact may affect, in turn, the economic state of many other healthy companies and of their employees, on medium and long term.

On such grounds, the Government decided that it is decisive to come out with an action to provide the SMEs with liquidity during the COVID-19 crisis. In this purpose, the Government issued another regulation, i.e. the Emergency Government Ordinance No. 37/2020, meant to help the financing of the companies, as well as individuals, during the COVID-19 crisis. One of the main provisions of this ordinance is the possibility of having the obligation to reimburse the loans suspended for a period of maximum 9 months, until December 31, 2020 at the most. The methodological norms for the appliance of this Emergency Government Ordinance came into force by the Government Decision No. 270/2020 published in the Official Journal on April 6, 2020.

The impact of the insolvency procedure

According to special legal provisions, the current regulations issued during the COVID-19 crisis do not apply to a company placed under the insolvency procedure.

As long as the business of a certain company is not restarted after COVID-19 lockdown, the company will not be able to use the financing that it is entitled for, according to the previously mentioned regulations. Thus, such company is unable to produce income to allow it to reimburse the loan even if it had obtained it. Consequently, the future of this company shall entail the initiation of the insolvency procedure, which makes it ineligible for accessing either the State guaranteed loans or the suspension of reimbursement obligation of the loans that had been concluded before the COVID-19 crisis.

The near future will show whether the Government’s measures mentioned above will be enough for the SMEs to make it through the COVID-19 crisis in terms of liquidity. So far, the State enacted some provisional measures meant to prevent insolvency, as mentioned bellow in more detail.

Legal measures concerning the Insolvency Law

Law No. 55/2020 concerning certain measures for preventing and combating the effects of the COVID-19 pandemic has been published in the Official Journal on May 15, 2020. The law concerns the special measures to be applied during the state of alert that came into force on May 15, 2020 for a period of time of 30 days. This law specially regulates the insolvency domain in its Section 8.

In terms of obligations under the Insolvency Law No. 85/2014, the following is noted:

On the one hand, a company is considered under insolvency after 60 days of not being able to pay a minimum RON 40,000 claim. Law No. 55/2020 increased this level of the claim to RON 50,000 for the companies that totally or partially stopped functioning as a consequence of the Government’s measures enacted during the state of emergency or during the state of alert.

On the other hand, the Insolvency Law No. 85/2014 provides the obligation of the debtor to ask the opening of the insolvency procedure within a maximum term of 30 days since the state of insolvency occurred. Law No. 55/2020 changed this obligation into an option of the debtor, during the state of alert period of time.

Regarding the creditors’ possibility to ask for the opening of the insolvency procedure against their debtor, Law No. 55/2020 introduced a preliminary condition: during the state of alert, the creditors are entitled to ask the opening of the insolvency procedure against their debtor only after they try to reach a settlement. In this respect, the creditors shall prove their attempt by written documents, including electronic correspondence.

To conclude, beside the substantial regulations mentioned above concerning financial measures meant to help in bonis companies, the reason of the changes brought by Law No. 55/2020 is to enact certain procedural measures to prevent the companies from entering into insolvency.


The specific Government financing measures enacted as a response to the COVID-19 crisis are meant to help in bonis companies to avoid entering into insolvency. Once a company fails and enters into insolvency, it cannot use such financial measures anymore.

The recent Law No. 55/2020 comes with additional procedural measures meant to create a buffer between a possible state of insolvency and the opening of the insolvency procedure. The reason of such buffer is to allow the creditors to make an out of court settlement with the debtor. We foresee a single way to escape for both creditors and debtors: cooperation and good will in finding out a solution for continuing or restarting the business of the debtor.

As far as the State’s help is involved, at a macroscopic level, we underline the obligation of the State to create the conditions for a free market economy, especially to create demand of products and services in order to keep the business of the companies running.