The restructuring of groups of companies requires regulation

The restructuring of groups of companies requires regulation

It is difficult to adopt one strategy and coordinate activities if the restructuring of related companies is carried out separately.

The squadron of ships is commanded by an admiral. It implements strategic and tactical goals in the name of the common interests of the fleet. The commanders of individual ships must submit to this interest. Companies that are related to each other should operate in a similar way.

Group as a whole

It’s just that the Polish company law lacks a regulation that distinguishes the interest of the group as a whole. However, work is underway on changes in this area. It is worth inspiring them also by the restructuring law. Regulations regarding the restructuring of related entities, including groups of companies, are very rudimentary. Admittedly, the act indicates that it is possible to combine and jointly conduct restructuring in the case of related entities. It is even possible to appoint one judge-commissioner, court supervisor or administrator for all joint cases. Furthermore, a single board of creditors may be appointed to oversee an administrator or even a joint meeting of creditors to vote on the arrangement.

But that’s just a theory. In practice, such restructurings are carried out separately as there is no obligation to merge them.

Only some courts appoint the same judge-commissioner and administrator for such separate cases, conducted in related companies. This is not obvious, however, and sometimes the Judge Assignment Information System (SLPS) identifies different judges. As a result, it is difficult to adopt a joint restructuring strategy, and sometimes also to coordinate activities.

Common goal

Generally, our law regulates only the procedural aspects of the judicial restructuring of groups of companies. However, it is not enough to indicate that the same entity will handle the affairs of different companies. It should also be specified, whose interests are to be pursued by individual administrators and judges commissioners. If we assume that this will be the interest of a group of companies as a whole, the particular needs of creditors of individual subsidiaries may be violated. In such a situation, it would be necessary to guarantee each company a minimum of security so as to prevent gross violation of their interests.

Currently, however, each company pursues its own, individual interest. Meanwhile, it is worthwhile for them to act together for a common goal. For example, if the rehabilitation of several partner companies is opened, the restructuring plan and composition proposals should take into account that during their normal business activities, the counterparties were aware that they were concluding agreements that benefit the entire group, and not just the selected company. Thus, also a company that is formally solvent should be subject to recovery, and its assets should be used to pay off creditors of other entities from the group.

It would also be possible to implement in restructuring proceedings binding institutions of orders issued to the daughter company by the parent company. Of course, even the assumption of responsibility by the mother for the consequences of such orders will not guarantee that the rights of the daughter company’s creditors are sufficiently protected. They would have to be guarded by an administrator, and in certain situations also by a creditors’ council.

Sources of inspiration

We have an example to follow when it comes to restructuring groups of companies. For example, you can refer to the EU Regulation 2015/848, which indicates the impact of insolvency practitioners in individual proceedings on others, including the content of restructuring plans and the conclusion of agreements. The regulation also governs the so-called group coordination procedure. In his case, it is the coordinator who often manages the different interests of individual national proceedings.

Another source of inspiration is the UN model regulations. The organization operates through the Committee on International Trade Law (UNCITRAL). The model law relating to the insolvency of groups of companies provides, inter alia, for the conduct of one joint proceeding for all related companies.

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