According to Romanian Laws, debtors in financial difficulty, who are not already in a state of insolvency, can use one of the insolvency prevention procedures – the restructuring agreement and the composition with creditors.
The insolvency law expressly defines what this state of difficulty entails - the state generated by any circumstance that determines a temporary impairment of the activity which conducts to real and serious threat to the debtor's future ability to pay his debts when due, if there are are not taken appropriate measures; the debtor in difficulty is able to fulfill his obligations as they become due;
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The insolvency prevention procedures are not available for the following debtors:
It should be noted that the crime of simple bankruptcy, set in motion only upon the prior complaint, involves the failure of the insolvent debtor to fulfill his legal obligation to request his insolvency, more than 6 months over the legal term provided in this regard (30 days from the insolvency state’s emergence/5 days after finishing the negotiations with the creditors, in progress at the emergence of the insolvency state).
Insolvency prevention procedures involve, alike insolvency procedure, the participation of the syndic judge (the court in whose jurisdiction the debtor's corporate or professional seat is located) and an insolvency practitioner, as the restructuring administrator.
During these procedures, the debtor retains his administration rights and employment relationships may remain unaffected.
An important aspect to point out - as a rule, the contractual partners of de debtor who initiates an insolvency prevention procedure cannot terminate the contracts concluded with the latter and do not have the right to suspend or refuse the execution of their own obligations on the grounds of insolvency procedure initiation. Any contractual clauses in this regard are considered unwritten – will not produce any effects.
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THE RESTRUCTURING AGREEMENT
It is initiated exclusively by the debtor. With the restructuring administrator’s support, chosen by the debtor, the latter draws up a proposal for a restructuring agreement, detailing, among others:
The proposed restructuring agreement is communicated to affected creditors, by the restructuring administrator, specifying the voting mechanism and deadline (at least 20 days after the communication). The right to vote belongs only to affected creditors.
Negotiations with creditors are initiated, and the proposed agreement is updated according to what was agreed in the negotiations and re-communicated to all affected creditors. The voting procedure is resumed after each change.
The restructuring agreement is considered accepted if voted favourably by the creditors holding the absolute majority (50%+1) of the affected claims total value (for those debtors who do not have the legal obligation to establish separate receivable categories and do not choose to establish them), respectively if it is voted with the same absolute majority of total amount of receivables, within each legal receivables category.
The legal receivable categories (in relation to which the voting majority is analysed, which must also be highlighted in the proposed agreement) are:
a) receivables that benefit from preferential rights – e.g: guaranteed by mortgages or similar rights (property reserve until the full price is paid, redemption agreements or debt assignments concluded as a guarantee); receivables that benefit from legal privileges with an associated right of pledge (regardless of whether the debtor has the capacity of a third-party guarantor or has guaranteed an own debt)
b) salary receivables;
c) claims of indispensable creditors (their products or services are indispensable to the continuation of the debtor's activity and cannot be replaced under reasonable economic or financial conditions), if applicable;
d) budgetary/fiscal claims;
e) the other claims.
Even if the absolute majority is not reached for all receivable categories, the judge will be able to confirm the agreement, if other minimum margins prescribed by law are met.
After the voting procedure is finished, the voting results are reflected in a Minutes and within 3 days the debtor must submit to the court a request for confirmation of the restructuring agreement, accompanied by other prescribed document.
Not in all situations a court confirmation is required - in some cases, the agreement, as negotiated directly by debtor with his creditors, can be confirmed only by an insolvency practitioner. Conditions: the debtor has a net turnover or/gross income of a maximum of 500,000 euros equivalent to lei; the restructuring agreement was voted by al,l the affected creditors; the restructuring does not require a new financing nor the dismissal of more than 25% of the employees.
The court will reach a decision within 10 days from the confirmation request’s registration, in council chamber, as a rule, without summoning the parties. Thus, the procedure ensures a high degree of confidentiality and speed.
The confirmed agreement confirmed is communicated through the restructuring administrator to both affected and unaffected creditors within 48 hours of ruling and is enforceable.
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During the confirmed restructuring period, not exceeding 3 years from its confirmation, the restructuring agreement’s execution is monitored by the insolvency practitioner, who will draw up a quarterly report, which he will communicate to the affected creditors.
Until the restructuring agreement procedure is closed, the debtor, on the one hand, cannot use any other insolvency prevention procedure - he cannot avoid the consequences of non-execution/impossibility to complete the initial agreement. Creditors with affected claims, on the other hand, cannot request the debtor’s insolvency, regardless of whether they did not vote or voted against the agreement.
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If the agreement is fully executed, the procedure is closed.
If the agreement fails, the affected claims are reborn (decreasing by the amounts paid in the procedure), and the creditors whose ancillaries were suspended/limited by the restructuring agreement, can retroactively calculate and claim their due ancillaries.
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If the debtor subsequently enters in insolvency procedure, the prior restructuring period will be part of the suspicious period - that period for which it will be checked whether the debtor's operations were fraudulent or not.
In cases of following insolvency, those operations carried out according to the confirmed restructuring agreement are protected from cancellation.
Likewise, new financings contracted under the confirmed restructuring agreement will not be affected. The judicial administrator/judicial in insolvency is entitled to request their cancellation, if they are considered to be fraudulent.
