The prepared liquidation, the so-called pre-pack, functions in Polish law from above 4 years. The revision of the rules on this procedure has entered into force 24 March 2020 The main objective of the changes is to streamline and normalise the pre-pack procedure.
Pre-pack means declaring the firm bankrupt, while taking over the company, its parts or essential assets by the investor, which does not result in liquidation. The company can continue to operate and the buyer is not burdened with debts of the previous owner. The most important feature of this procedure is the sale of assets and non-maturity assets to a company for a higher amount than in the case of a standard liquidation of bankruptcy.
Prior to the amendment, the pre-pack institution is regulated in accordance with Article 56a-56h Bankruptcy laws were dedicated directly to entrepreneurs, and the use of the prepared liquidation in the event of consumer bankruptcy was questionable and only due to doctrine. The legislature in the legislation governing insolvency proceedings against natural persons added Article 4912(1a), which directly allows for the application of the provisions of the prepared liquidation also in the case of insolvency proceedings of natural persons.
Significant changes to the procedure
The applicant may be both debtor and creditors, added Article 56a(6) provides that the application may concern more than one buyers, which will affect cooperation between investors who are interested in other assets. In addition, auctions between purchasers shall be carried out in the event of at least the submission of two applications for approval of the terms of sale (for the same assets).
Necessity of deposit by the purchaser of a security one tenth the price offered, such a solution protects the offer. The security shall be refunded if the purchaser has not been granted, the application has been rejected, rejected or discontinued the proceedings. In addition, the syndication retains the bond if the sale agreement is not concluded by the buyer.
After submitting an application, the court shall establish a temporary judicial overseer or a forced administrator who shall report, in particular, on the financial condition of the debtor and the relevant information on the expected costs of insolvency proceedings to be incurred in the liquidation on a general basis and on the information necessary for the examination of the application.
The application shall be published in the Judicial and Economic Monitor. The creditors of the application shall be notified and shall have the right to respond within the time limit 14 days.
Court of First Instance approves the application after expiry 30 days from the date of notice and after at least 14 the days from the date on which the application was served to creditors secured against the assets of the debtor concerned.
The improvement of the pre-pack procedure should be assessed positively. In particular, attention should be paid to the fact that insolvency proceedings are shortened and more complete and that creditors are satisfied more quickly and that judicial practice is harmonised.
Author: Michał Zawiła
Partner in RB Restructuring. Licensed Restructuring Advisor, entry No 1050. Lawyer entered on the list at the District Bar Council in Katowice.