Summary of news published in January 2023 on the Restructuring Website
Articles that in January 2023 appeared in various press and Internet titles devoted to broadly understood restructuring and bankruptcy were reflected in the Restructuring Service.
The analysis of information published in the last month on the Website made it possible to identify a few dominant issues that deserve comment.
Difficult economic situation
An important topic last month was the difficult economic situation generated by the accumulation of problems, namely: the ongoing war in Ukraine, high inflation rate and rising electricity prices. The common denominator of the above-mentioned phenomena are the growing costs of running a business, which force an increasing number of entrepreneurs representing various industries to make decisions about the need to initiate corrective actions in the form of restructuring or to close their businesses. These types of dilemmas currently concern mainly: many owners of gastronomic establishments, publishers of the printed press, farmers. However, as it turns out, also global consortia in the form of technology companies are not free from economic problems. Their directors more and more often decide to implement corrective actions in the form of an analysis of the current activity and limiting the one that seems unprofitable and reducing employment.
More restructuring proceedings and fewer declared bankruptcies
Restructuring appears as an opportunity to heal the business and survive difficult times. No wonder that in the face of accumulating problems, entrepreneurs decide to take corrective action. From year to year, there is a systematic increase in the number of opened restructuring proceedings. This is reflected in the data presented by the Central Economic Information Center (COIG). According to them, last year there were 2,379 open restructuring proceedings. This is 26% more than in 2021.
Moreover, it is noticed that the number of declared bankruptcies decreases proportionally to the increase in the number of opened restructuring proceedings. There are actually fewer bankruptcies announced both in relation to enterprises and individuals. In 2022, 360 company bankruptcies were recorded. This is 14.5% less than in 2021. A similar decrease of 14% was also recorded in the case of consumer bankruptcies. In 2022, there were 15,662 of them, and in 2021 – 18,205. Nevertheless, experts predict a slowdown in this trend and a systematic increase in the number of bankruptcies.
Among the companies that, after a long presence on the Polish market, ceased operations was TXM Textilmarket. A few years ago, the company underwent an effective and successful restructuring. However, the coronavirus pandemic stood in the way of rebuilding the lost position on the market. The management of the company saw the reasons for the failure in the negative impact of the pandemic and the lack of support from the state during this difficult period. It is worth noting that currently clothing and industrial discount stores, and TXM was just such a type of store, are becoming more and more popular. This is evidenced by, for example, the condition of Pepco. This leads to the conclusion that a combination of unfavorable circumstances slowed down and finally ended the activities of TXM.
In January, unexpected news was the sudden decision of the management of the Shopee sales platform to close the Polish branch. This seemed surprising due to the large advertising expenditures incurred by the platform to promote its presence and the relatively good results it obtained. In just a few months, it took second place, right after Allegro, in terms of the most popular sales platforms. Nevertheless, the management of the company was not satisfied with the results obtained and after only one and a half years decided to leave the Polish market.
Polish market attractive to foreign investors
Although some foreign companies are leaving the Polish market, others show great interest in it. According to last year’s data, the number of foreign investments seems satisfactory. It is counted in hundreds, and the money invested in billions of euros. Interest is observed from different sides, both from the west (Germany) and the east (Belarus), from afar (United States) and close (Switzerland). Particularly noteworthy is the increase in the number of companies established by Ukrainians, which is a consequence of the prolonged war. The juxtaposition of the cited activity with the data of the National Court Register cools optimism. These data clearly show that in 2022 there was an increasing number of company closures. Referring to the above-mentioned information about the numerous problems that entrepreneurs in many industries are currently struggling with, one should look into the future with great caution.
New opening of completed cases
According to media reports, on the last day of 2022, the trustee of Idea Bank filed an application to the court to open proceedings to change the arrangement regarding the restructuring of GetBack S.A. (now Capita). At the same time, an application for protection by appointing a temporary court supervisor was submitted.
An application for a change in the arrangement is due if, after the restructuring, there has been a permanent increase or decrease in the income from the debtor’s enterprise. A change is also possible when there are problems on the part of the debtor that increase the risk that the arrangement will not be performed. Then the change of the arrangement may consist in entrusting the management and execution of the arrangement to a designated person in place of the debtor.
Proceedings on changing the arrangement raise many doubts, because the provisions have been formulated in a laconic manner, and the practice of the courts – due to the rarity of submitted applications – is not widely known.
An interesting problem is the very admissibility of the security application – by temporarily regulating the situation until the submitted application is examined. Although the provisions of the Code of Civil Procedure on security are not applied in the restructuring proceedings themselves, the proceedings to change the arrangement are not typical restructuring proceedings. It begins after the final approval of the arrangement, i.e. after the end of the restructuring proceedings. However, some courts recognize that the impossibility of applying the provisions on securing proceedings extends also to these proceedings. Undoubtedly, however, in such a case there is often a need to regulate the situation temporarily – due to the risk to the performance of the arrangement. Therefore, the submitted application finds a very interesting legal ground and paves the way for desirable solutions that have not been directly regulated in the act.
The case of Rafako S.A. deserves special attention. Rafako S.A. announced that in connection with claims for damages and contractual penalties filed against it (with a total amount of over PLN 1.3 billion), it may be forced to file for bankruptcy. It seems, however, that talks are still underway to avoid the worst-case scenario and to work out a solution that will allow the company to stay on the market.
It is worth recalling that just over 2 years ago, Rafako S.A. successfully completed the procedure of accepting and approving the arrangement under simplified restructuring proceedings (conducted on the basis of the provisions introduced during the coronavirus pandemic). On the other hand, declaring the Company bankrupt would result in the repeal of the concluded arrangement and the resulting legal consequences.
Summarizing the above, it should be emphasized that the information published on the Website about restructuring in January was characterized by diversity and different overtones. Many of the indicated problems will certainly have their continuation. We mean: the increasingly noticeable “spreading” of the economic crisis to other industries, the relationship between the number of restructuring proceedings opened and the number of bankruptcies announced, the interesting case of GetBack and the continuation of Rafako’s history.
The summary was prepared by: Ph.D Maria Wąsicka-Sroczyńska, attorney-at-law Maciej Woźniak and restructuring advisor Hubert Zieliński.