Failure to accept the arrangement and what’s next? (part II)
Failure to accept the arrangement in restructuring proceedings does not necessarily mean the termination of the debtor’s business. Debtors can use other solutions provided for in restructuring law if they see a chance to reach an agreement with creditors and their company generates appropriate revenues. As a last resort, they can always use the simplified bankruptcy application procedure.
Unsuccessful restructuring does not prevent the debtor from conducting further restructuring proceedings. There is no statutory prohibition to conduct the same proceedings again, with the exception of those indicated in Art. 226a section 2nd year The legislator does not allow proceedings for the approval of an arrangement with an announcement on setting the arrangement date to be carried out if, over the last ten years, the debtor has conducted proceedings for the approval of an arrangement in which an announcement on setting the arrangement day was made, or if the restructuring proceedings against the debtor were discontinued over the last ten years. (except when the restructuring proceedings were discontinued with the consent of the creditors’ committee).
The debtor should also remember that in order to limit abuses in initiating restructuring proceedings, instruments have been introduced, such as a motion to annul the effects of the notice in the proceedings for approval of the arrangement (Article 226f of the Law) and a motion to dismiss the debtor’s motion to open court proceedings (and in the course of the proceedings also application for discontinuation). The indicated legal remedies are based on the premise of harming the creditor. In the case of court proceedings, the issue of harm to creditors is each time examined by the court when the proceedings are opened (Article 8(1) of the Law), and in the case of proceedings for the approval of an arrangement only after the debtor has obtained protection against enforcement.
Simplified application for opening restructuring proceedings
If the arrangement was not accepted by the creditors during the accelerated arrangement proceedings or arrangement proceedings, but the entrepreneur still sees a chance to repair the enterprise by implementing restructuring measures (and obtaining the support of creditors under new conditions), he or she has the option of using the institution of a simplified application for opening restructuring proceedings ( Article 328(1) of the Labor Law).
The legislator has provided certain simplifications for the debtor:
- the application is subject to a fee of only PLN 200 (Article 75 point 6 of the Act on court costs in civil cases) instead of PLN 1,000 (as in the case of a “classic” restructuring application)
- the application must only meet the formal conditions of the pleading, so the debtor does not have to prepare any additional documents. The court will use the material collected during the previous restructuring proceedings.
The decision on submitting a simplified application must be made by the debtor within one week from the date of the creditors’ meeting at which the arrangement was not adopted or within the deadline for filing a complaint against the decision to discontinue the proceedings (two weeks). The Act does not exclude the possibility of simultaneously filing a complaint against the discontinuation of the proceedings. In such a situation, in order to consider a simplified application for opening restructuring proceedings, it is necessary for the decision to discontinue the proceedings to become legally binding.
Also in the proceedings for approval of the arrangement, the debtor has the opportunity to submit a simplified application for the opening of restructuring proceedings, but it seems that the failure to accept the arrangement will not be a factor justifying the application. Pursuant to Art. 226h p.r. it is possible to submit a simplified application for the opening of restructuring proceedings referred to in Art. 328 of the Labor Law, within seven days from the discontinuation of the proceedings regarding the examination of the application for approval of the arrangement. It seems that the discontinuation of the proceedings regarding the examination of the application for approval of the arrangement will take place on the basis of Art. 355 of the Code of Civil Procedure, mainly as a result of the debtor withdrawing the application.
Simplified application for declaring bankruptcy
An entrepreneur who was not supported by creditors may also, after an unsuccessful vote in court proceedings, submit a simplified application for declaration of bankruptcy (Article 334 of the Labor Law). Experience shows that this is a solution that entrepreneurs use with great reluctance. The debtor does not have much time to make this important decision. The simplified application must be submitted within the deadline for filing a complaint against the decision to discontinue restructuring proceedings (two weeks). As in the case of a simplified restructuring application, the simplification consists in reducing the formal requirements compared to a traditional bankruptcy application and in reducing court costs.
Unfortunately, failure to accept the arrangement in court proceedings opens the way to simplified bankruptcy not only for the debtor, but above all for his creditors. The main purpose of a simplified bankruptcy application is to enable creditors to quickly, efficiently and simply submit an application in a manner that enables continuous protection of the debtor’s assets in the period from the discontinuation of the restructuring proceedings until its final recognition.
However, creditors should remember that the court will suspend the examination of a simplified bankruptcy petition until the complaint against the decision to discontinue the restructuring proceedings is examined.
Failure to accept the arrangement in restructuring proceedings does not mean the end of the enterprise. Debtors are implementing new restructuring proceedings (mainly quick and out-of-court proceedings for approval of the arrangement), and as a last resort they can also use the simplified procedure for filing for bankruptcy.
The actions chosen by the debtor, after failure to accept the arrangement, should be determined by the aspect of previous failures. If the debtor did not have enough time to convince creditors, and the business development is realistic, the debtor may continue to fight for survival. However, if none of the creditors is willing to sit down with him, it is better to focus on the smooth termination of the company’s operations and focus on building a new venture free from failures.