The simplified restructuring procedure stays on for longer
The simplified restructuring procedure lasts longer than originally assumed. On June 30, 2021, the amendment entered into force, which introduced the possibility of announcing the opening of this restructuring procedure by November 30, 2021.
Anti-Crisis Shield 4.0 (the Act of 19 June 2020 on interest subsidies for bank loans granted to entrepreneurs affected by COVID-19 and on simplified proceedings for approval of an arrangement in connection with the occurrence of COVID-19) introduced a new instrument to the Polish system – a hybrid of the already existing proceedings for approval of an arrangement and accelerated arrangement proceedings – the so-called simplified restructuring procedure. Originally, the use of this tool was to be possible only until June 30, 2021. On the last day, an amendment entered into force, which extended this deadline to November 30, 2021.
Reasons for extending the simplified restructuring procedure
According to the published reports, the simplified restructuring procedure is very popular among entrepreneurs. In 2020, as much as 50.5% of all restructurings were restructuring proceedings conducted on the basis of the provisions of the Anti-Crisis Shield 4.0. This level increased significantly in the first quarter of 2021. The analysis of the announcements published in the Court and Economic Monitor (“MSiG”) shows that approx. 84% of all restructuring are simplified restructuring proceedings.
Moreover, on December 1, 2021, the Act of May 28, 2021 amending the Act on the National Register of Debtors and certain other acts, including the Restructuring Law, will enter into force. Pursuant to the aforementioned legal act, the simplified restructuring procedure will be replaced by the amended procedure for approval of the arrangement. Therefore, the legislator allows, until the new regulations come into force, to use the previously proven procedure. The essence of the changes, which will enter into force on December 1, 2021, was described in more detail in a recently published article by PH. D. Patryk Filipiak:
Advantages of the simplified restructuring procedure
Let us recall that the simplified restructuring procedure was introduced as a support tool for entrepreneurs struggling with the effects of the pandemic. A number of simplifications of this structure (in relation to “standard” procedures) allow the entrepreneur to act quickly and efficiently. According to this model, the entrepreneur-debtor, after concluding an agreement with a licensed restructuring advisor, independently makes an announcement in MSiG, informing about the start of the restructuring process. The announcement on the opening of simplified restructuring proceedings is a turning point: the debtor obtains anti-enforcement protection for a period of 4 months, which is important – he does it without the participation of the court. This is a response to a serious practical problem, i.e. an extended (often too long) waiting time for the decision to open proceedings. It happens that every day counts for a debtor in a difficult economic situation, and many months of waiting for a court decision, tantamount to a lack of protection, may lead to an additional deterioration of the entrepreneur’s situation. The length of the protection period does not raise any objections. The debtor has 4 months to reach an agreement with the creditors, if, despite the expiry of the deadline, the debtor does not submit an application for approval of the arrangement, the procedure for approval of the arrangement is discontinued.
In the announcement, the debtor indicates the arrangement date, which is crucial from the perspective of the creditors ‘interests – it is on the basis of the arrangement date that the liabilities covered by the arrangement and the creditors’ voting rights are determined.
The simplified restructuring procedure also protects the interests of creditors. If the notice results in harm to the creditors, they have the right to demand that its effects be set aside.
The undisputed advantages of the simplified restructuring procedure include, first of all, the reduction of formal requirements related to the initiation of the restructuring process. The consequence of this simplification is the acceleration of restructuring, with particular emphasis on the ease and speed of obtaining enforcement protection.
