In these turbulent times, we have been approached by clients to discuss their business problems. As a Romanian law firm, we have developed an expertise in this area, enabling us to clarify for clients the major issues and the areas where they can improve the chances of their businesses surviving in Romania.
When a company or an individual is in serious financial problems and is insolvent as proscribed by the law, then it is possible for the debtor and his creditors to sign an agreement by which the demands of the creditors are satisfied in whole or in part with personal and financial implications. This agreement is made to avoid the bankruptcy procedure. The agreement between the parties allows for financial recovery measures to be taken through the preventive agreement. The agreement is usually drawn up by the Romanian lawyers involved with the client, together with the debtors’ Romanian financial advisors.
The debtor who is in this position can take the preventive procedure and make a composition with his creditors. Any request to enter into such an agreement between the debtor and his creditors has to be referred to the court for the syndic judge to decide on the terms of the agreement.
According to Law 85/2014, the syndic judge rules on:
a) the resolution of the request for the opening of the procedure;
b) appointment of the administrator contracted by the debtor to implement the procedure;
c) approval, at the request of the bankruptcy administrator, of the restructuring plan;
d) verification of the claims to exercise the right to vote on the restructuring plan;
e) any appeals;
f) ordering inter alia on the continuance or extension of the judicial suspension of forced executions against debtors or the lifting of the suspension;
g) resolving the request to close the preventive arrangement procedure; and
h) any other duties provided by law.
According to Law 85/2014, the procedure is opened by a request to open the procedure by the debtor. If the conditions are met, the syndic judge will admit the request and order the opening of the arrangement procedure.
Within 60 days from the opening of the procedure, the administrator draws up the restructuring plan to satisfy the creditors’ requirements.
The restructuring plan is subject to the creditors’ vote, and after its approved by them, it is subject to approval by the syndic judge within 3 days from the end of the minutes of approval of the restructuring plan.
The restructuring plan is approved at the moment of the opening of the preventive arrangement procedure. From the moment of the opening of the arrangement procedure, any judgements being enforced against the debtor and the prescription periods for the debts are suspended by law for a maximum period of 4 months but no later than the date of the pronouncement of a decision approving the restructuring plan or closing the procedure.
From the date of the approval until the date of the pronouncement of a court decision terminating the preventive arrangement procedure, the insolvency procedure against the debtor cannot be opened at the request of an affected creditor.
After the approval of the arrangement, it is then the responsibility of the administrator of the arrangement to implement its terms together with the debtor under the supervision of the syndic judge.
From our experience, these schemes of arrangement can be successful but should not be treated as a panacea for bad management. As challenging times seem to be ahead, it is necessary to consider with your lawyer in Romania whether such a step is beneficial both to our client’s business and to the person as an individual.
