Changes in restructuring proceedings from July 2022

The Ministry of Justice is now preparing a draft amendment to the restructuring and bankruptcy law. The new provisions, in line with Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) 2017/1132 (known as the Second Chance Directive), are to facilitate the continuation of the company’s operations despite its difficult situation.

Faster and more efficient restructuring proceedings

Given that Poland took advantage of the opportunity to delay the implementation of the Second Chance Directive, the new provisions have to be introduced by 17 July 2022. The main goal of the planned legislative changes is to protect businesses against bankruptcy and save jobs.

Recently, the situation of companies in distress has been improved by the introduction of a simplified restructuring procedure under Shield 4.0, which, however, ceased to operate at the end of November 2021. In its place, fundamental changes were made to the proceedings for the approval of arrangement, adjusting it to the regulations introduced in connection with the coronavirus pandemic. Now, due to the need to introduce further changes to implement the Second Chance Directive, the Ministry is proposing further changes on the basis of which – as officials inform – companies are to gain even greater support in the form of faster and more efficient proceedings while maintaining the principle of trust in business.

 Key changes to the restructuring procedure:

• Overcoming the objection of creditors – the possibility of approving the arrangement against the objection of a group of creditors; one the changes are introduced, if a group of creditors votes against the arrangement and the others are in favour, the court will be able to adopt the arrangement taking into account the valuation of the entity, the content of the arrangement, the interests of all creditors and the position of the debtor,
• Verification of the valuation – the possibility for the court to obtain expert verification of the company’s valuation in a situation where creditors question the restructuring plan,
• Participation of secured creditors – the participation and position of creditors secured by collateral will change; secured creditors, or creditors secured by e.g. a mortgage, are to be obligatorily covered by the arrangement (they are currently participating in the proceedings if they consent to it),
• Suspended enforcement for one year – possibility to suspend the enforcement for one year in all four paths of debt restructuring,
• Improved situation of creditors in the procedure for approval of an arrangement – restored ban to fulfil during the proceedings the obligations which had arisen before the debtor was covered by the protection against enforcement, i.e. before the announcement in the National Register of Debtors setting the date of arrangement.

The planned changes should be viewed as positive, because their aim is to increase the effectiveness of and accelerate the restructuring proceedings. Currently, the draft amendment is awaiting the entry into the agenda of the Council of Ministers.

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