Consequences of the announcement on setting the arrangement date in the National Register of Debtors

Introduction

Arrangement approval proceedings are the most popular restructuring proceedings currently conducted in Poland. Its attractiveness is largely due to the effects caused by the debtor’s optional announcement on setting the arrangement date and the related protection.

According to Art. 211 of the Restructuring Law Act (hereinafter referred to as the APL), immediately after the arrangement supervisor begins to perform its function, the debtor sets the arrangement date. The arrangement date falls not earlier than three months and not later than the day before the date of submission of the application for approval of the arrangement. The arrangement date is the date on which creditors’ rights to vote on the arrangement and the effects of the arrangement are determined. After the changes introduced in December 2021, the arrangement supervisor may announce the setting of the arrangement date, which has a number of significant consequences for the debtor’s business.

Article 226e p.r. determines the effects of the announcement on setting the arrangement date. According to its content, during the period specified in Art. 226d p.r. provisions of art. 256 p.r. and art. 312 p.r. applies accordingly.

Inadmissibility of termination of key contracts (Article 256 of the PPR)

After the arrangement date has been announced, the counterparty cannot terminate the debtor’s key contracts for running an enterprise, such as: lease or lease agreement for premises or real estate where the debtor’s enterprise is run; loan agreement regarding the funds made available to the borrower before the date of opening the proceedings; lease agreement; property insurance contract; bank account agreement; surety agreement; an agreement covering the licenses granted to the debtor; guarantees or letters of credit issued before the date of the announcement and other contracts of fundamental importance for running a business¹. The task of the arrangement supervisor is to prepare a list of contracts of key importance for running the enterprise.

However, if the debtor, after the announcement of the arrangement date, fails to perform its current obligations, obligations not covered by the arrangement, or if another circumstance provided for in the agreement occurs, the protection does not apply. This regulation therefore excludes the possibility of terminating the contract due to arrears and events occurring before the arrangement date.

Suspension of executions

Enforcement proceedings instituted before the announcement of the arrangement date are suspended by operation of law on the date of the announcement. If the bailiff has enforced the sums obtained in the suspended enforcement proceedings for the creditors, he is obliged to return them to the debtor’s account immediately after the announcement of the arrangement date in the National Register of Debtors.

From the moment of announcing the arrangement date in the National Register of Debtors, it is also impossible to direct new executions against the debtor’s assets and to execute a decision or order to secure a claim against the debtor’s assets. Execution of maintenance payments and pensions for compensation for causing illness, incapacity for work, disability or death, and for the conversion of rights covered by the life annuity right into a life annuity are excluded from the prohibition of enforcement.

Suspension of the limitation period for claims

In the case of claims for which the initiation of enforcement is not allowed, the limitation period does not start on the date of the notice on setting the arrangement date, and the commenced period is suspended for the duration of the arrangement approval procedure. The proceedings last until their final conclusion, discontinuation by a court decision or by operation of law, in the absence of an application for approval of the arrangement within 4 months, or until the effects of the announcement are legally repealed.

Powers of the court supervisor

From the date of the announcement, the supervisor of the arrangement exercises the powers of the court supervisor. The debtor has the right to perform only activities not exceeding ordinary management. With regard to the others, it is required to obtain the consent of the system supervisor. Consent may be given before the activity is performed and within 30 days after the activity is performed. Lack of consent results in invalidity of the act. In practice, the supervisor of the arrangement and the debtor often agree on the scope of activities which in a given case will be treated as activities exceeding ordinary management and will require the consent of the supervisor. It is also good practice to clearly determine the “form” of obtaining such consent, the manner and “way” for the Debtor to apply for consent, as well as the internal deadlines for its granting by the supervisor. Restructuring proceedings should not adversely affect the efficiency of the debtor’s enterprise.

Summary

The use of the announcement on setting the arrangement date has a number of consequences for the functioning of the debtor’s enterprise. The basic ones are the protection of the debtor against enforcement proceedings and the ban on terminating key contracts.

However, the protection granted to the debtor requires the consent of the arrangement supervisor for activities exceeding ordinary management. In general terms, the arrangement date notice is essentially a solution that strengthens the debtor’s position vis-à-vis creditors.

¹ P. Zimmerman, Prawo upadłościowe. Prawo restrukturyzacyjne. Komentarz. Issue. 7, Warsaw 2022.