Division of creditors into groups – group with one creditor
Arrangement proposals in restructuring proceedings may (and usually will) provide for the division of creditors into interest groups.
Layout proposals – a strategic element of the procedure
These proposals are made by the debtor, although the creditor council, the court supervisor, the administrator, and the creditor or creditors with a corresponding sum of claims also have the legitimacy to make such proposals. Appropriate construction of arrangement proposals is of great importance for the success of the entire restructuring process. Attractive terms of debt restructuring will encourage creditors to vote in favour of the composition agreement, and poorly structured arrangement proposals may expose the debtor to the court’s refusal to approve the composition agreement.
Examples of criteria for dividing creditors into groups
For example, Article 161(1) of the Restructuring Law provides for the classification of creditors in particular groups. According to this provision, the groups of creditors may include creditors who are entitled to employment claims and who have agreed to be covered by the arrangement, farmers who are entitled to claims under contracts for the supply of products from their own agricultural holding, creditors who have secured claims on the debtor’s assets (who have agreed to be covered by the arrangement), as well as creditors who are partners or shareholders of a debtor which is a capital company.
SUBJECT MATTER CRITERION – AMOUNT OF THE CLAIM
Of course, the catalogue indicated in the Act is only of an exemplary nature and nothing prevents the arrangement proposals from providing for additional groups of creditors, or from providing for completely different eligibility criteria at all. The practice of restructuring procedures indicates that the arrangement proposals usually provide for a division according to the material criterion, which is the amount of receivables. Debtors then propose a division into a group of creditors who are entitled to claims up to a certain amount and a group in which claims exceed this ceiling. Due to the fact that the economic burden of satisfying the lowest claims is the least felt by the debtor, creditors from the first group obtain satisfaction either faster or to a higher degree. Conversely, satisfaction of the highest denomination claims will usually require their repayment to be spread over a larger number of instalments, or satisfied more quickly, but taking into account the higher level of redemption.
Restrictions on the restructuring of certain claims
However, the debt structure of the restructured entity very often includes public-law claims, to which the Act grants a special status as regards the possibility of their restructuring. In the vast majority of cases, debtors have debt due to tax arrears and liabilities to the Social Insurance Institution. While the former may be restructured in the same way as ordinary commercial receivables, the application of the criterion relating to the amount of receivables to ZUS could have significant consequences for the debtor.
Pursuant to Article 160(1) of the Restructuring Law, restructuring of liabilities due to social security contributions in the part financed by the debtor as the employer, due to contributions to the Labour Fund, Guaranteed Employee Benefits Fund, Bridge Pension Fund, due to the debtor’s own social security contributions and health insurance and other liabilities of the debtor towards the Social Insurance Institution, in particular default interest on the aforementioned contributions, enforcement costs, costs of a reminder and additional fee, may only include rescheduling or postponing the payment date. Similar restrictions also apply to receivables constituting state aid (Article 156(3) of the Restructuring Law).
By the same token, the adoption of an agreement under which ZUS would be classified as a creditor group, in which the restructuring of liabilities provides for at least the smallest part of them to be written off, would give rise to an obligation on the part of the court to refuse its approval. An agreement adopted in this form would violate the law.