Separation of creditors covered by the partial agreement

Separation of creditors covered by the partial agreement

The partial arrangement is a very attractive instrument for debtors whose financial situation is dependent only on certain creditors and therefore it is unnecessary and too costly to restructure all its liabilities.

A partial arrangement can only be concluded in an arrangement approval procedure and a fast-track arrangement procedure. A proposal for a partial arrangement can only be made by the debtor, the partial arrangement itself must involve at least two creditors (claims not covered by the partial arrangement must be governed by the legal relationship between the debtor and the creditors). The purpose of an arrangement is to restructure a specific set of receivables, which is intended to improve the economic situation of the debtor.

The debtor may submit composition proposals concerning only certain liabilities whose restructuring has a fundamental impact on the further functioning of the debtor’s business. The separation of creditors covered by the partial arrangement is based on criteria that are present:

Objective – the criteria should be objectively justified from a legal or economic point of view. Separation cannot therefore take place on the basis of subjective characteristics.
Unambiguous – selected criteria must be so precise that there should be no doubt as to whether a given receivable is covered by a partial agreement or not.

Economically justifiable – receivables covered by a partial arrangement must be separated on the basis of economically justifiable criteria from the debtor’s point of view.

It is unacceptable to define such criteria, the purpose of which is to omit the creditor opposing the conclusion of the partial arrangement. There is no doubt that the debtor may choose more than one selection criterion. The criteria chosen by the debtor are subject to the control of the restructuring court.

There is no uniform view on the possibility of dividing creditors in a partial arrangement into different categories of interest. In the light of the current regulations, it seems that the division into interest categories within a partial arrangement is unacceptable (however, the debtor may lead to the conclusion of more than one partial arrangement, which in practice will allow to achieve a similar effect).

The partial arrangement is an instrument that allows the debtor to restructure only the key receivables, without the need to interfere with relations with less strategic creditors.

 

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