Duration of protection in proceedings for approval of the arrangement with the announcement of setting the arrangement date
Proceedings for approval of the arrangement in its current formula, also referred to as proceedings for approval of arrangement 2.0, are characterized by speed and out-of-court procedure. Unlike other restructuring proceedings, it gives an opportunity to vote and conclude an arrangement at an early stage, without waiting for the court to open it. In this respect, it has an advantage over remedial proceedings, the results of which – although much more significant – are not possible to achieve in such a short time.
Protection in connection with the notice on setting the arrangement date
From the date of the announcement by the supervisor about the arrangement date in the National Register of Debtors (KRZ), the debtor is entitled to protection consisting of two elements: the ban on terminating contracts under Art. 256 p.r. and enforcement protection under Art. 312 R.P. These measures undoubtedly contribute to the popularity of PZU, which is the most frequently chosen form of restructuring proceedings. Protection against enforcement is provided by law, from the date of announcement in KRZ. The same applies to the ban on terminating lease, tenancy, etc. contracts. However, the ban on terminating contracts of fundamental importance for the debtor’s business must be preceded by the arrangement supervisor adding a list of such contracts to the KRZ case file. Their catalog is open, but it concerns such contracts as, for example, factoring and all other contracts without which the further functioning of the enterprise is impossible.
Protection is not granted in the case of proceedings for approval of the arrangement without making an announcement on setting the arrangement date. The decision to make the announcement rests with the debtor. Proceedings for approval of the arrangement may therefore take place in two variants – with or without protection (without notice). The latter mode will usually be applied when the debtor has already used the notice earlier – in the period of the preceding 10 years.
Arrangement day at PZU – what is it?
The starting point for the correct determination of the duration of the effects of the announcement is understanding the relationship between the arrangement date and the announcement of its determination in the KRZ. The arrangement date divides the debtor’s claims into those covered by the arrangement – arising before it, and not covered – arising on that day or later. It may be set for a day not earlier than 3 months and not later than the day before the date of submission of the application for approval of the arrangement. However, pursuant to Art. 226g of the APL, the effects of the announcement on setting the arrangement date expire by operation of law if the debtor fails to submit an application to the court for approval of the arrangement within four months from the date of the announcement.
How long does the protection guaranteed by the new PZU last?
Therefore, the arrangement date may be set at the earliest 3 months before the date of submission of the application for approval of the arrangement. However, in accordance with the regulations, the protection of the debtor lasts 4 months from the date of the announcement on setting the arrangement date, and the protection is independent of the submission of an application for approval of the arrangement. After the expiry of the deadline, the effects of the notice expire by operation of law, but it is possible to annul the effects of the notice earlier by the court. The protection of the debtor against enforcement and termination of contracts is a direct result of the announcement of the arrangement date, not the arrangement date itself.
Arrangement date, and the date of the announcement of the arrangement date
The discrepancy between the four-month protection period and the three-month period for submitting an application for approval of the arrangement (calculated from the arrangement date) causes interpretation difficulties. The problem boils down to the question of whether the arrangement date may be later than the date of its announcement. There are currently two views on this. According to one of them, the announcement of the arrangement date should not fall later than the arrangement date, due to e.g. the need to prepare a list of receivables, for which it is necessary to determine the arrangement date (it is not possible to prepare a list “for the future”). In this case, however, the question arises about the meaning of the additional month of protection, falling after the expiry of the deadline for the application for approval of the arrangement.
One of the possible answers is to recognize that the protection lasts not 4 but 3 months in such a case. Adoption of the thesis on the shortened, 3-month period of protection, however, is difficult to reconcile with Art. 226g of the LPL, which states directly that the application may be submitted within 4, not 3 months from the date of the announcement. The supporters of the practice of setting the arrangement date to a date later than the notice oppose, among others, argument referring to the list of receivables. They argue that the list of claims is updated only at the time of voting on the arrangement.
The beginning of the protection guaranteed by PZU is the same as the date of the announcement. However, it ends with the final discontinuation of the proceedings from the application for approval of the arrangement or with the end of the proceedings for approval of the arrangement. In the event that an application for approval of the arrangement is not submitted, the protection expires after 4 months.
The current regulation leaves many doubts and unexplained practical issues. The broad protection provided by the new PZU is strong, but also limited in time. It expires by operation of law within 4 months from the date of the announcement, unless the debtor submits an application to the court for approval of the arrangement. Such a short period of protection imposes on the debtor and the supervisor the obligation to conduct the proceedings efficiently. It is also a safety net preventing the debtor from abusing the privileges guaranteed by the new PZU.
The flaw in the Act, which resulted in divergent interpretations, was noticed in the course of work on amending the restructuring law. In the draft act published on February 8, 2023, the definition of the arrangement day was changed (it falls on a day not earlier than 4 months before submitting the application for approval agreement), it will also not be possible to set it for a day later than the announcement. In addition, it was specified that the arrangement approval proceedings are discontinued by operation of law if no application for approval of the arrangement is submitted to the court within 4 months from the arrangement date.