Will the simplified restructuring proceedings stay in Polish legislation for good? The draft act is ready.

The analysis of the Court and Business Gazette (Monitor Sądowy i Gospodarczy) leads to a conclusion that for the last half-year the entities struggling with insolvency have usually been using the so-called simplified restructuring proceedings. Do such proceedings, however, stand any chance to become a fixed part of the restructuring process?

Let’s recall that the simplified restructuring proceedings were introduced into the Polish legal system by the so-called Anti-Crisis Shield 4.0 (The act on subsidization of interest on bank loans granted to entities affected by COVID-19 and simplified arrangement approval proceedings due to COVID-19; Journal of Laws, item 1086). The Anti-Crisis Shield 4.0 became effective on June 24, 2020 and is to be effective on 30 June 2021 as for the simplified restructuring proceedings. 

The principal benefits of the simplified restructuring proceedings involve:

  • commencement of restructuring proceedings without court interference (the simplified restructuring proceedings is commenced by a debtor declaring such commencement in the Court and Business Gazette (Monitor Sądowy i Gospodarczy);
  • suspension of ongoing execution proceedings and ban on commencing new debt enforcement proceedings (similar to recovery procedures but without the possibility to waive seizures made during the debt enforcement proceedings);
  • possibility to include the debtors secured in rem by the arrangement by operation of law (similar to the partial arrangement procedure);
  • relatively short time of proceedings (the debtor acting with the supervisor is obliged to approve the arrangement within 4 months from the commencement of the simplified restructuring proceedings. After this time the protection in restructuring proceedings expires, unless a motion to accept the arrangement has been filed.

There is every indication that the simplified restructuring proceedings, after necessary amendments, will become present in the Polish legal system. On the website of the Government Center for Legislation one may find a draft act amending the National Register of Debtors Act and Certain Other Acts (version of 27 January 2021) including the mentioned amendment to the Restructuring Law, the act of 15 May 2015 in which the proceedings to approve the arrangement are regulated (articles 210-2268)

The new proceedings to approve arrangement - according to the draft - is not the copy of the present simplified restructuring proceedings. The main differences include:

  1. Once the day of arrangement is appointed, the arrangement supervisor shall be obliged to refer all and any files of the proceedings as well as to keep them in the electronic system in which the court conducts the proceedings.
  2. It will be the arrangement supervisor, not the entrepreneur (debtor) who will decide whether the proceedings should be opened.

  3. The announcement can only be made after the completion of the inventory, the record of challenged claims and the scheme of the restructuring plan.

  4. The announcement will be inadmissible if the debtor has been running, for the last ten years, the proceedings to approve an arrangement in which the announcement to appoint the day of arrangement was made or if a restructuring proceedings against such a debtor has been discontinued in the last ten years, excluding the situation where the restructuring proceedings were discontinued upon the consent of the creditors’ committee.

  5. During the proceedings not only will the rule to discontinue pending execution proceedings or to open new execution proceedings apply but it will also be possible to discontinue attachments enforced during execution proceedings including bank account attachments.

  6. Contracts listed in the Restructuring Law (e.g. lease, tenancy, loan - see article 256 of the Restructuring Law) as well as “other contracts crucial for the debtor’s economic activity” will be protected against termination. The supervisor of the agreement will draw up the list of other crucial contracts and file such a list within 21 days from the day the proceedings are announced.

  7. It will still be admissible for the court to annul the effects of the announcement to open the proceedings to approve the agreement (for example when such proceedings may lead to creditors’ detriment), the decision of the court then will be subject to appeal, which is not applicable in the present, binding act.

  8. If, within four months from the day when the announcement is published, the debtor fails to refer to the court a motion to approve the agreement, the effects of the announcement shall expire by operation of law.