Supervisor of the implementation of the agreement

Supervisor of the implementation of the agreement

According to Article 171 of the Restructuring Law, on the date of the effective date of the provision approving the arrangement, either the supervisor or the administrator shall assume the function of supervisor of the implementation of the arrangement, unless the arrangement provides otherwise. The provisions on the supervisor of the implementation of the agreement, with the exception of the provisions on the necessity of concluding an agreement, shall apply accordingly to the supervisor of the implementation of the agreement. The supervisor of the implementation of the arrangement shall report to the court every three months on the implementation of the restructuring plan and the implementation of the arrangement.

That is the amount of legislation. The rest belong to the sphere of interpretation and practice. We will not discuss the issue systematically here. We will focus on a few of the practical issues below.

Supervisor of the implementation of the agreement

Firstly, the supervisor of the execution of the agreement is not obligatory at all. In the layout it can be decided that there will be no such function. In practice, however, it is difficult to imagine creditors taking such a decision and voting for it. We all know that the real success for creditors is only the implementation of the agreement, not its conclusion and approval. An entity that oversees the situation and has access to information from the debtor is a fundamental element of the system for ensuring the security of creditors.

Control over the debtor

Secondly, it is possible to strengthen control over the debtor during the implementation phase of the arrangement. The Act provides for a basic solution. It can be abandoned by providing the supervisor with additional competences, for example, by providing for the necessity to obtain the supervisor’s consent for certain activities of significant importance. It is also possible to appoint a forced administrator to replace the supervisor by an arrangement, who will manage the debtor’s business. Such a board may be temporary and may cover only the first key stage of the implementation of the agreement.

Obviously, in such a solution, part of the responsibility for the operational activity will be assumed by the creditors whose interest is defended by the performance supervisor or forced administrator.

The nature of the activities of the supervisor may approximate to those of the supervisory board acting on behalf of the owners. In this case, however, the supervisor will act in the interests of the creditors. This is in line with the nature of creditor control over a debtor’s undertaking. Let us remember that the debtor is still potentially insolvent during the agreement implementation phase. Debt restructuring is conditional on the implementation of the arrangement. If the Agreement is repealed, commitments shall revert to their original amount. And the debtor typically becomes insolvent.

Responsibility for business

Thirdly, from the perspective of the debtor, it is important to reach an agreement with the supervisor in such a way that it does not disrupt the operational activity. At the agreement implementation stage, it is generally the debtor who assumes full responsibility for the business. Under this assumption, the supervisor of the arrangement actually performs an information function only, which is expressed in the submission of quarterly reports to the court. The problem will only arise if creditors equip the supervisor with broader supervisory rather than controlling powers.

Time of the function

Fourthly, from the supervisor’s perspective, it is worth remembering that the function covered by the statutory remuneration does not end with the final approval of the arrangement. The supervisor should anticipate that he will perform his duties sometimes even for many more years from that moment. The Act does not prevent the agreement from providing for a fixed or variable monthly remuneration of the supervisor for the function he performs. In the case of proceedings for approval of an arrangement, the remuneration is specified in the agreement between the debtor and the restructuring consultant. Remuneration for the stage of supervision of the implementation of the Agreement should already be provided for in that Agreement.

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