Several Aspects regarding the Evolution of Insolvency Disputes in Romania
The evolution of insolvency disputes is closely connected to the evolution of the market. Thus, the latest economic background has influenced not only the increase in the number of insolvency files, but also how they have unfolded.
Law no. 169/2010 has brought about a series of amendments to Law no. 85/2006 regulating insolvency procedure, the tendency being to ensure the celerity of the procedure. To this end, a series of terms have been shortened (for example: the second appeal term is of 7 days, the term for the contestation of the official receiver’s actions is of 3 days). Nevertheless, practice has proved that the shortening of terms has not necessarily led to a proportional reduction of the duration for completion of an opened procedure. This in the conditions in which the debtor’s redressing or its deregistration imply a series of partial liquidation actions or, as the case may be, total liquidation of its patrimony, whose success depends on the liquidity of the market on which such assets are going to be turned to account.
The initiative of opening insolvency proceedings may belong to the debtor or to its creditors. Depending on the company’s patrimony state and on its functionality, one may take either the way of debtors entering directly into the simplified procedure, or the way of opening the general procedure of insolvency. Thus, in certain conditions expressly enumerated by the law (such as, for example, when the debtor holds no assets, its constitutive or accounting deeds cannot be found etc.), one may order the debtors to directly enter into the simplified procedure – this is an accelerated form of entering bankruptcy. The simplified procedure may be ordered also after an observation period of maximum 50 days, based on the conclusions of the report prepared by the official receiver. Regulation of the simplified procedure represents a measure contributing to the shortening of the period for the settlement of an insolvency file.
When the opening of the general procedure of insolvency is ordered, there follows an observation period for the analysis of the debtor’s situation. Afterwards, the procedure may take successively or separately the following directions: reorganization, bankruptcy.
Reorganization tends to the safeguarding of the debtor, and its premise is a reorganization plan including a programme for the payment of the receivables, subject to a vote by the classes of creditors, its confirmation by the syndic judge and, as the case may be, to implementation. In the last year there has been an increase in the number of files in which a reorganization plan is unfolding. This means, on the one hand, that debtors have started to manage insolvency risks more carefully. On the other hand, as regards the creditors, that, analyzing the comparative situation of the recovery of debts in the two hypostases (reorganization/bankruptcy), they started to accept the reorganization variant. Still, the files in which the reorganization procedure has been ordered do not exceed 5% of the total number of insolvency files, this being a procedure suitable rather for medium and large debtors.
Bankruptcy implies liquidation of the debtor’s estate in order to cover liabilities, and is followed by the deregistration of the debtor from the trade registry. Unfortunately, the sale of debtors' assets is facing problems due to the low liquidity of the market. As a matter of fact, for certain categories of assets subject to sale, there are no sufficient benchmarks on the market (especially as regards specialized/niche products) in order to identify comparison terms or offers for their acquisition. Difficulties in selling assets implicitly lead to the increase of the costs of the procedure (implying additional expenses for the protection of assets, payment of related taxes etc.).
During the procedure, the Creditors’ Committee and the Creditors’ Meeting, in which the creditors are called to express their vote with regard to the main actions that are taken in relation to the debtor during the procedure, play important roles.
At present, in consideration of the project of reform of the Romanian judicial system, at the end of 2011, the works for the codification of the insolvency matter were initiated. Thus, it has been proposed that an Insolvency Code should be elaborated, which would reunite and harmonize all normative acts relating to the insolvency area, pre-insolvency stage, as well as the ones referring to the exercising of the insolvency practitioner profession.