Arrangement despite opposition by creditors

Arrangement despite opposition by creditors

There is a provision in the draft amendment to the restructuring law. It provides that the court will be able to approve the company’s recovery plan against the opposition of creditors.

Until now, material creditors, e.g. banks, could block the agreement by refusing to participate in the proceedings. After the amendment enters into force, such a possibility will no longer exist. The deputy minister of justice explains that such an arrangement will enter into force with appropriate securities, despite their objections. But the court must find that restructuring will bring more benefits than liquidation. In doing so, it should take several things into account. These are, for example, the content of the arrangement, the interests of all creditors and the position of the debtor.

In addition, the court will have the opportunity to expertly verify the valuation of the company. This will be possible in a situation where creditors question the restructuring plan.

The deputy minister of justice assures, however, that the possibility of overcoming creditors’ objections will be used by the court only exceptionally. This is because, in general, the proposed changes assume reaching an agreement that would be acceptable to the majority.

In light of the new provisions, the share and position of materially secured creditors will also change. This applies to preventive restructuring proceedings. At present, restructuring includes material creditors, provided that they agree to it. The exceptions are the partial arrangement and the simplified restructuring procedure.

In addition, the solutions being prepared are intended to ensure that the interests of creditors who finance entrepreneurs are protected. The aim is to ensure that the new regulations do not have a negative impact on the availability of credit and other forms of financing.

Another important change is the unification of the use of suspension of individual enforcement actions by debtors in the course of restructuring.

The amendment is also intended to correct the shortcomings of the procedure for approval of an arrangement. From 1 December 2021, it has replaced the simplified restructuring procedure. Thanks to the amendments, it is supposed to correspond to the procedure that was introduced for the pandemic period.

The draft amendment to the restructuring and insolvency law has been approved for inclusion in the government’s work list. The law would enter into force on 17 July 2022.


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