License of a qualified restructuring advisor

By the Act of 4 April 2019, the legislator introduced into the Polish legal system the possibility for a restructuring advisor to obtain the title of “qualified restructuring advisor”. According to the justification of the draft act, this amendment aims at separating a group of advisors who can “demonstrate professional experience necessary to perform functions in complex restructuring and bankruptcy proceedings”.

MANDATORY APPOINTMENT OF A QUALIFIED RESTRUCTURING ADVISOR IN THE PROCEEDINGS

This title will not only have a meaning of “prestigious”, because with it significant restrictions have been introduced in the rules of appointing out-of-court bodies of proceedings (receivers, supervisors, administrators) to proceedings concerning entrepreneurs whose enterprise, in accordance with the Act – Entrepreneur Law, exceeds the criteria allowing to qualify them as “medium” entrepreneurs. In proceedings in which bankruptcy or restructuring will concern “bigger than average” entrepreneurs, as well as companies of significant importance for the state economy or entrepreneurs of special economic and defensive importance (included in the lists specified in the relevant executive regulations), the court obligatorily appoints a qualified restructuring advisor in these proceedings.

As indicated in the justification of the draft, the introduced regulation does not exclude at the same time the application of provisions concerning the binding indication of a restructuring advisor by authorised entities (a debtor with the consent of creditors holding at least 30% of receivables) and is not applicable in proceedings for the approval of a composition agreement (where a debtor independently concludes an agreement with a selected restructuring advisor).

REQUIREMENTS FOR OBTAINING THE TITLE OF QUALIFIED RESTRUCTURING ADVISOR

Demonstrating by a restructuring advisor the experience necessary to obtain “qualifications” takes place by submitting documents confirming the fulfillment of conditions in the form of conducting, within the last 7 years, a series of bankruptcy, restructuring or asset management proceedings of at least a medium sized enterprise. The number of proceedings necessary to conduct the proceedings has been built in a variant manner, taking into account bankruptcy and reorganisation proceedings with the possibility of entering into an arrangement, whereby it is always necessary to conduct at least one proceedings ending in an arrangement (experience in bankruptcy proceedings of a liquidation nature alone is not sufficient).

NEGATIVE REASONS

A negative premise for granting the title of a qualified restructuring advisor is the circumstances related to his disciplinary liability. Specifically, the possibility of obtaining a “qualification” precludes a final decision on one or more fines or one or more appeals from performing the function of a supervisor, administrator or receiver within the last 7 years prior to filing an application for the title. Alternatively, you may receive two or more warnings within the last two years prior to filing such an application.

PURPOSE OF THE AMENDMENTS

The Ministry of Justice anticipates that the changes introduced, along with the regulation of the Minister’s supervision over persons holding restructuring advisor licences, will contribute to a gradual improvement in the quality of services provided by advisors and more effective conduct of insolvency proceedings.

Although the title of qualified restructuring advisor may be applied for as early as August this year, the discussed regulation in its main part comes into force on 1 January 2020. At the same time, the legislator provided for a transitional provision, according to which it will be possible to waive the appointment of a qualified advisor if the number of persons with this title will not be sufficient to service all bankruptcies or restructuring of large enterprises or if, due to their number, granting all such proceedings to authorised advisers will be contrary to the good of the justice system. The Minister of Justice shall be notified of such extraordinary state of affairs. This extraordinary state of affairs shall be notified to the Minister of Justice (cf. Article 7 of the Act on Restructuring Advisor Licence).

CONSEQUENCES OF NOT APPOINTING A QUALIFIED ADVISER IN A SPECIFIC PROCEDURE

It is also worth considering the consequences of unjustified failure to appoint a qualified advisor in a specific proceeding. It will then be necessary to apply Article 359(1) of the Civil Procedure Code, which allows to change and supplement, ex officio, the provisions that do not end the proceedings in a case. If we accept the concept that the decision to appoint a supervisor is not subject to appeal (the appeal concerns only the decision to open proceedings), there is no other way to reassume the defective decision. It is permissible on the basis of systemic interpretation to assume that the decision on appointing the administrator does not end the proceedings in the case.

However, the problem is that on the basis of the civil procedural doctrine, the provision of Article 359(1) of the Civil Procedure Code. Another, also doubtful, solution would be to change the decision by way of self-correction as a result of an appeal (Article 395(2) of the Code of Civil Procedure). Of course, a complaint against a decision to appoint a supervisor is not and is subject to rejection, but it cannot be ruled out that the court, before rejecting the complaint, will revoke its erroneous earlier decision and appoint an entity with a qualified advisor’s licence anew.

ASSESSMENT OF THE NEW REGULATION

Initially, it seems that the introduction of an additional level of qualification of restructuring advisors should be assessed positively. Due to the relatively low experience requirements imposed on applicants for an advisor’s licence (3 years of any size of business), in fact, it may have happened in practice that a person with little business experience was appointed as the manager of a large company. The amendment of the rules will help to ensure that advisors dealing with the largest market players have appropriate practice and documented experience.