New division into groups
Introduction
The purpose of restructuring proceedings is to satisfy the debtor’s creditors evenly and to treat them equally, so that none of them is harmed. The legislator provides for exceptions that allow differentiating the situation of creditors in the proceedings. One of them is the division into groups based on interest categories.
Draft amendment to Art. 161 p.r.
The current wording of the provision of Art. 161 sec. 1 and 1a p.r. provides that the division of arrangement proposals is obligatory only when they include creditors secured in kind (e.g. by mortgage, pledge). In other cases, the division into groups depends on the decision of the debtor. This legal status makes the separation of the category of satisfaction a very controversial issue. There are situations when the court refuses to approve the arrangement, indicating that the division made is incorrect and was carried out instrumentally, e.g. taking into account the debtor’s preferences in terms of which creditors he would like to cover with more favorable arrangement proposals (see the decision of the District Court in Poznań, X Division of March 1, 2022, X Gz 784/21).
Currently, work is underway to implement into the Polish legal system Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, discharge of debt and disqualifications and on measures to increase the effectiveness of restructuring, insolvency and and discharge of debts, as well as amending Directive (EU) 2017/1132 (hereinafter: “the Directive“). According to Art. 9 sec. 4 of the Directive, the division of interested creditors into groups reflecting a sufficient community of interests on the basis of verifiable criteria is obligatory, while the Directive absolutely requires to separate a group of secured creditors from a group of unsecured creditors. This means a completely new approach to qualifying and separating groups of categories of creditors.
The changes that are being prepared are to introduce rules for isolating creditors similar to the rules currently provided for a partial arrangement. The arrangement is to cover individual categories of interests based on consistent, objective, clear and justified criteria regarding the legal relationship between the debtor and the creditor. Within one group, arrangement proposals should be the same.
The implementation will expand the scope of cases in which it is mandatory to divide arrangement proposals according to the category of creditors’ interests. Among the obligatory introduction of division into groups, one should distinguish the situation when among those covered by the arrangement there are creditors who are entitled to:
- claims arising from the employment relationship (referred to in the Labor Code) and who have agreed to be included in the arrangement;
- receivables under contracts for the delivery of products from own farm;
- receivables secured on the debtor’s assets by mortgage, pledge, registered pledge, treasury pledge or maritime mortgage, as well as by transferring ownership of the thing, receivable or other right to the creditor in part covered by the value of the collateral.
Moreover, the amendment to the restructuring law also provides for the obligatory division into groups of creditors’ interests if the arrangement includes claims of creditors who are partners or shareholders of the debtor being a capital company and holding shares or stocks of the company corresponding to at least 5% of votes at the shareholders’ meeting or at the general meeting.
In the adopted amendments, the arrangement is to be non-aggressive to groups of creditors, as it provides for their equal satisfaction in relation to each other. At the same time, the division into groups is to reflect the bankruptcy hierarchy and enable approval of the arrangement without the consent of the creditors – while meeting additional criteria related to the appropriate satisfaction of individual categories of creditors.
Summary
The main objective of the changes being prepared is to introduce a clear system and rules for dividing claims into groups according to the categories of interest, to ensure proper protection and equal treatment of creditors who are in a similar economic or legal situation. In addition, the proposed solutions provide greater protection for creditors against harm.
In the legal environment, the proposed changes are received positively, however, it is also postulated to adopt a solution that would oblige the judge-commissioner to approve the division into groups of creditors, which would protect against refusal to approve the arrangement for this reason at a later stage of the proceedings. Such a solution would undoubtedly be in the interest of creditors.
