Restructuring procedure – what kind of restructuring to choose in the event of a firm's insolvency risk?

Restructuring is a concept of many entrepreneurs operating in the field of activity, but a wide range of possible measures to improve the economic situation of the economic operator creates difficulties in selecting appropriate legal instruments.

The phenomenon of company bankruptcy in the short term makes the time to choose effective restructuring measures drastically shorter. How, then, will the company be retained by implementing the appropriate restructuring procedure?

Depending on the analysis of the individual situation of the company, under the current legislation, it is possible to respond quickly and effectively to the occurrence of circumstances causing the company's economic crisis.

1. Introduction

With assistance in the selection of restructuring actions comes the legislature, which introduced in the bill with 15 May 2015 Restructuring law 1 court procedures for the debtor to enter into an insolvency or insolvency arrangement with creditors. Depending on the restructuring efforts that the debt company intends to implement, it is possible to achieve financial stability of the company in particular by restructuring liabilities, assets or even organisational structures with the participation of the relevant majority of creditors, by concluding an arrangement by way of one of four restructuring proceedings:

• 1) approval procedures,
• 2) accelerated systemic procedure,
• 3) the arrangement procedure,
• 4) sanatorium proceedings.

The main objective of the legal procedures set out in the Restructuring Act is to be able to introduce effective instruments to enable the restructuring of the debtor company to be carried out and to prevent its liquidation[2].

The choice of the type of restructuring procedure depends primarily on the diagnosis of events having a significant impact on the company's current and future operational activities.

The identification of the causes of the difficult economic situation, then the assessment of the possibility of applying certain legal solutions to the entrepreneur, in order to draw up and submit a restructuring application to the general court including, inter alia, contractual proposals, aims to try to escape the danger of insolvency or insolvency.

2. Types of restructuring proceedings

The choice of restructuring procedures depends on the debtor’s own needs and capabilities, which can select an appropriate restructuring procedure at different stages of financial problems.

The restructuring procedure within the meaning of the Act must be distinguished from the so-called ‘informal restructuring’, which is carried out without the participation of the court and without any legal procedure being followed, which involves the debtor negotiating with creditors in order to sign an agreement laying down the rules for the restructuring of existing debt.

On the other hand, the restructuring procedure within the meaning of the provisions of the Restructuring Act provides for the participation of creditors under the law itself, regardless of their will.

"Construction of the restructuring procedure eliminates the so-called “stopping from cooperation” problem, which usually accompanies informal restructuring processes.

In a situation where the debtor's assets may not be sufficient in the future to satisfy all claims, the creditors as a whole will benefit from restructuring and the situation of each of them considered separately will deteriorate (the problem of the so-called “common pool”).

This issue is linked to the risk that some creditors may refrain from interacting with the creditors in general.

It cannot be excluded that certain creditors may take recovery measures to overtake other counterparties of the debtor and obtain the maximum possible satisfaction of their own claims from the debtor's assets at the expense of the possibility to satisfy other creditors.’ 3 .

A common trait four „the statutory’ restructuring proceedings are carried out in the framework of them, the restructuring of the debtor’s company — First, its liabilities, then assets and employment.

Legally regulated procedures are intended to ensure that the form of restructuring tailored to the needs of a company in financial difficulty is chosen.

All restructuring proceedings shall specify the scope of the claims covered by the arrangement, the arrangement proposals, the effects of the proceeding, as well as the rules of conclusion, amendment and repeal of the arrangement.[4].

2.1. Procedure for approval of the system

The procedure allowing the conclusion of an agreement with creditors with minimum participation of the court shall be dedicated to debtors who are able to obtain agreement with most of their creditors without the participation of the court. At the same time, the legislator protects the interests of creditors by introducing mechanisms that would prevent the unlawful omission of creditors and prevent them from voting. The elements safeguarding the interests of creditors are:

• • participation in the proceedings of a person licensed as a restructuring adviser,
• • the introduction of formalised voting rules governing its validity,
• • enabling creditors to know the economic situation of the debtor,
• • the possibility for creditors to object to the collection of votes,
• • the specific requirement of the majority necessary for the conclusion of the Agreement.

Prior to work on preparing the arrangement proposals by collecting the votes, the debtor First, conclude a contract with a licensed restructuring adviser to supervise the conduct of proceedings which will perform the functions of the system supervisor[5].

The debtor shall then determine the contractual date on which the statement of claims covered by the arrangement will be drawn up. The arrangement day shall be no earlier than three months and no later than the day before the application for approval of the arrangement was submitted.

Consequently, claims arising after the contractual date will not be covered by the agreement[6].

Debtor acceding Next, to collect the votes of creditors using the ballot card according to the model annexed to the Regulation of the Minister of Justice 7 under the discretion of the vote invalid. How the debtor will communicate with creditors, deliver ballots and conduct negotiations will depend solely on the strategy adopted.

The system supervisor shall also provide the creditor with the information requested to enable him to vote after hearing the debtor's property situation and the possibility to execute the arrangement.

If the creditor considers, on the basis of the explanations obtained, that the conduct of the independent collection of votes is incorrect, he will be able to submit reservations to the system supervisor, which will be attached to the report submitted to the court together with the request for approval of the arrangement.

The creditor’s voice remains valid during the period third the months following the casting of the vote until the date on which the debtor is requested to approve the arrangement.

The procedure for the self-collection of votes provides for a specific requirement for the majority necessary for the conclusion of the Agreement.

The arrangement shall be adopted if the majority of the creditors entitled to vote on the arrangement having a total of at least two third the sum of the claims giving rise to voting on the arrangement.

A simultaneous achievement is therefore needed two majority: personal (over 50% eligible voters in favour of the arrangement) and equity (holding 2/3 capital entitled to vote by creditors who voted in favour of the arrangement)[8].

In this procedure, there is also the possibility of voting in groups of creditors and the adoption of an arrangement for all claims despite the absence of an adequate majority in the other groups.

In such a case, the arrangement shall be accepted if the creditors having a total 2/3 the sum of the claims owed to the creditors entitled to vote on the agreement have voted in favour of the agreement, and the creditors of the group or groups who have spoken against the agreement will be satisfied on the basis of the arrangement to a degree not less favourable than in the event of insolvency proceedings[9].

In each case, the possibility of such proceedings will be granted to debtors who are not subject to a negative condition regarding the existence of claims in dispute giving rise to voting on the agreement which do not exceed 15% the sum of the claims giving rise to voting on the arrangement.

After obtaining an adequate majority of the votes in favour of the arrangement, finding that there is no negative reason and notifying the other creditors, the debtor will apply to the court for approval of the arrangement which will have to comply with the formal requirements applicable to the pleading 10 and the law on restructuring[11].

At each stage of the procedure, a professional operator is involved, i.e. a restructuring adviser acting as the Supervisor of the Agreement, on which the obligation to submit a number of documents lies.

The report by the supervisor, among other things, will also have this additional value that the credibility of such documents will be greater.

The removal of many obligations from the debtor will be extremely important when the application is made in particular by a small entrepreneur for whom it would cause great difficulties in practice. The court, when approving the agreement, will rely solely on submitted documents[12].

The time allowed for the court to issue an order to approve the arrangement shall be 2 weeks. At the time of the adoption of such a provision, the arrangement supervisor shall acquire the powers of a judicial supervisor[13].

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The choice of procedure for approval of the arrangement gives the possibility to quickly agree with creditors with the minimum participation of the court. The purpose of this action is to deformalise negotiations with creditors while judicial review is carried out when the agreement is concluded. The restructuring of the debtor’s liabilities is therefore legal and covers all debts.

2.2. Rapid Systemic Procedure

The legislator has introduced further possibilities for the implementation of restructuring in the context of the company's deep financial crisis. The accelerated arrangement procedure will be able to take rapid action to stabilise the operation of current commitments in a factual and legal situation where:

• • the sum of the disputed claims giving rise to voting on the agreement must not exceed 15% the sum of the claims giving rise to voting on the arrangement,
• • Whereas the preparation of the restructuring plan and the arrangement proposals will be carried out by an independent judicial supervisor appointed by the court,
• • the termination of individual contracts is unacceptable 14 , essential for the further conduct of business,
• • the debtor will receive judicial protection against the execution of the contractual claims.

The accelerated arrangement procedure shall begin with an application made by the debtor. Formal requirements of the proposal 15 are similar to the conditions for the application for bankruptcy.

In addition, copies of the arrangement proposals for all creditors are required to allow for the appointment and notification of creditors as soon as possible, by providing them with copies of the arrangement proposals and a list of the disputed claims which warrant such proceedings[16].

The court should recognise the application for an accelerated arrangement procedure at a secret sitting within the time limit 7 days from the date of submission of the application without formal deficiencies[17].

Adhering to the content of the application, the court opens an accelerated arrangement procedure, simultaneously setting up a judge of the Commissioner and a judicial overseer.

From that point on, the debtor is obliged to provide all information to both the Judge Commissioner and the Judicial Supervisors which are needed or may be beneficial to the proper conduct of the proceedings.

On the date of the opening of the accelerated arrangement procedure, the contractual mass comprising the material and intangible components (assets) of the debtor on the day of the opening of the procedure and acquired after that date shall be legally generated.

From the date of the opening of the accelerated arrangement procedure until the date of its termination or the decision to discontinue the accelerated procedure is hereby inadmissible:

• the satisfaction by the debtor or the manager of the benefits arising from claims which are covered by the agreement by law,
• charge the contractual mass with a mortgage, a lien, a registered lien, a tax lien or a maritime mortgage, after the opening of the proceedings to secure the claim arising before that date, except in the case of an application for entry of a limited right in rem on six months before the date on which the application was lodged,
• the deduction of mutual claims covered by the arrangement between the debtor and the creditor in the event of conditions for deduction after the date of opening of the proceedings, except as a result of the creditor's payment of an obligation (in person or in kind) arising before the date of opening of the proceedings;
• denunciation by landlord or lease the lease or lease of the premises or properties in which the debtor’s business is held, without permission from the creditor board,
• termination of credit agreements on funds placed at the disposal of the borrower before the date of opening the proceedings, leasing, property insurance, bank account contracts, guarantee agreements, contracts involving the licenses granted to the debtor and guarantees or letters of credit issued before the date of opening the accelerated procedure,
• initiating enforcement proceedings and enforcement of the order to secure the claim or order to secure the claim resulting from the claim covered by the contract by law.

The principle of equal satisfaction of creditors requires their position to be established in an accelerated arrangement procedure at the time of the opening of that procedure, since the performance of benefits at the discretion of the debtor or the formation of a right in rem guaranteeing the claim would change the position of the creditor in the proceedings to a much more favourable one.

The arrangement shall cover claims on the debtor arising before the date of the opening of the proceedings, as well as claims secured by the transfer of property, claims or other right, as well as claims secured by mortgage, lien, registered lien, tax lien and maritime mortgage, and, if the creditor so agrees, claims on the employment relationship.

However, the legislature allows for the possibility of securing assets of the debtor, but only liabilities not covered by the arrangement. The basic type of commitment will be a new loan to finance the implementation of the agreement or the restructuring of the debtor's assets, such as the necessary improvements in the debtor's undertaking.

The prohibition on the performance of the obligations covered by the arrangement shall be the inadmissibility of initiating and executing them after the opening of an accelerated arrangement procedure which is suspended by law and subsequently terminated in the event of final approval of the arrangement.

The suspension of proceedings shall not result in the right to revoke the activities carried out. However, leaving classes would conflict with the principle of equal satisfaction of creditors under the arrangement.

On the other hand, the seizure of bank accounts makes it very difficult to run an enterprise, which must use the bank accounts and the funds collected from them freely, in order not to disturb the regulation of liabilities arising from the opening of proceedings.

In such a situation, the judge-commissioner should, at the request of the debtor or of the judicial supervisor, revoke the seizure carried out before the date of opening of the accelerated arrangement procedure in enforcement or safeguard proceedings concerning a claim covered by law by the arrangement, if necessary for the continuation of the business.[18].

In an accelerated restructuring procedure, a creditor holding a claim secured in kind on the assets of the debtor (hypothecary, lien, registered lien, tax lien or maritime mortgage) may, in the course of an accelerated arrangement procedure, execute only on the subject of the security.

This principle should also apply to claims secured by way of collateral. Typically, a creditor holding, for example, a mortgage security does not direct executions to real estate but to funds held in a bank account.

Such an attitude of the creditor with the collateral in kind adversely affects the continuation of the business by the debtor. The material creditor thus gains an over-privileged position compared to the collateral held.

Therefore, the substance of the in-kind safeguards and their legitimate advantage in the legal system should not give rise to an excessive extension of powers at the expense of the other participants in the restructuring proceedings, in this case not only of the debtor but also of the other creditors for whom the possibility of continuing the business of the debtor is directly linked to the possibility of obtaining greater satisfaction.

In addition, a committee judge may, at the request of a debtor or a judicial supervisor, suspend enforcement proceedings as to claims not legally covered by the arrangement, if the enforcement is directed to the subject of the security necessary for the establishment.

The total duration of suspension of enforcement proceedings may not exceed 3 months[19].

In an accelerated arrangement procedure, the preferred way to satisfy the creditor is to set off, as it opposes the principle of equal treatment of creditors. Therefore, the possibility of deducting claims of the debtor and its creditor has been limited[20]. However, it is permissible to deduct reciprocal claims if both existed before the date of opening of the accelerated arrangement procedure for both the creditor having the right to deduct and the debtor.

It is also possible to deduct reciprocal claims if the debtor has become its creditor in a different way than by the acquisition of the contract debt from the person third, e.g. through commercial relations conducted after the opening of proceedings. In such a situation, the deduction shall not be subject to a contractual claim, i.e.

the principle of equal treatment of creditors shall not be infringed. It is also permissible to deduct the debt resulting from the purchase of the debt by paying the debt for which the buyer was personally or in kind, provided that the liability for the debt arose before the accelerated arrangement procedure was opened.

The liability in kind is a lien, mortgage or impairment on assets of a person who was not a personal debtor of the debtor to secure the person's debt third[21].

The facilitation of the debtor’s activities during the proceedings is to restrict the freedom of the debtor’s counterparty to exercise the powers resulting in the dissolution of certain types of legal relationship with the debtor.

Constraints in the exercise of the powers of the counterparty of the debtor shall not apply where the basis for the termination of the contract is that the debtor does not perform, after the opening of the accelerated contractual arrangement procedure, contractual obligations not covered by the contract or any other circumstance provided for in the contract, if any after the opening of the procedure.

For example, if the debtor has ceased to regulate the rental rent from part of the claim arising after the opening day of the proceedings as a non-contractual debt, landlord acquire the right to terminate the lease agreement[22].

„Restrictions on the termination of contracts refer to the categories of contracts specifically linked to the establishment. The opening of an accelerated arrangement procedure will also aim at making the economic situation of the debtor’s company more specific until the creditors have decided on the further fate of the debtor and the possible adoption of the arrangement. The purpose of this purpose is to exclude the possibility of termination of the lease or lease contract, as well as credit, leasing, property insurance, bank account contracts, bank guarantee and credit agreements, as well as contracts involving licences granted to the debtor. However, the protection of the debtor should not extend to the exclusion of the right to terminate the contract even if the debtor still fails to regulate its non-contractual obligations following the opening of proceedings. This would constitute a manifest, unjustified distortion of the powers of both parties to the agreement, contrary to constitutional principles. The circumstances following the opening of the procedure may therefore give rise to the termination of the contract, Article 256(3) p.r.’ 23 .

The speed of such restructuring proceedings is dictated, among others, by the imposition of a deadline 2 weeks, calculated from the date of the opening of the accelerated arrangement procedure, to be drawn up by the judicial supervisor and submitted to the judge-commissioner:

• • a restructuring plan taking into account the restructuring proposals submitted by the debtor;
• • a list of claims;
• • the register of disputed claims. The submission of the required documents makes it possible to set a date for the collection of creditors for the adoption of the arrangement.

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Selected relatively short instructional terms for the court – 1 one week to examine an application for an accelerated procedure; and 2 weeks after its opening to the judicial supervisor for the purpose of submitting a set of dossiers, are intended to enable such restructuring proceedings to be carried out within a period from 2 to 4 months[24].

In addition, the limitation of enforcement procedures resulting in the maintenance of financial liquidity and the continuity of business by preventing the termination of key contracts related to the firm from realising the chance for effective restructuring and then implementing the agreement.

However, the entire restructuring process must be carried out in close and timely cooperation between all parties involved.

2.3. Systemic management

The arrangement procedure is intended for entrepreneurs who:

• may not benefit from either the procedure for approving the arrangement concluded by independent collection of votes or the accelerated arrangement procedure, as the sum of the claims in dispute giving rise to voting over the arrangement exceeds 15% the sum of the claims giving rise to voting on the arrangement,
• are similar to the ability to meet on-going costs and obligations arising from the opening of the arrangement procedure.

This type of restructuring procedure is therefore a longer procedure. Therefore, in the event of exceeding the established threshold of the disputed claims, it will be possible to obtain the benefits of protection against enforcement and key counterparties in a larger time frame.

However, the legislator balances the granting of protection to the debtor over a longer period, laying down the principle that the debtor is required to resemble the ability to meet on-going costs of the arrangement procedure and obligations arising after the date of its opening.

If the debtor is not adequately qualified, the restructuring court should dismiss the application for the opening of the arrangement procedure. The debtor should, on the other hand, provide an account of the receipts and expenses expected and likely to arise after the opening of the procedure.

The calculations should show that revenue is sufficient to cover costs and liabilities throughout the course of the procedure.

The request to open the arrangement procedure shall be heard within the time limit two weeks from the date of submission of the application, unless a hearing is necessary. In that case, the application shall be made within the time limit six weeks[25].

The effects of opening a systemic procedure are similar to those of opening an accelerated systemic procedure (Article 238-256 p.r.) 26 , with the difference that in time 1 one month after the opening of the procedure, the judicial supervisor shall determine the composition of the arrangement mass by drawing up an inventory inventory, draw up and submit a restructuring plan to the judge-commissioner, taking into account the proposals for restructuring proposed by the debtor and the list of claims[27].

The Judge-commissioner shall, as soon as the restructuring plan has been submitted and the list of receivables has been approved, set a time limit for the collection of creditors to vote on the arrangement.[28].

In the arrangement procedure, the debtor is the originator of the accepted restructuring concept, as on the basis of his proposals for restructuring, the judicial supervisor is preparing a restructuring plan.

The Supervisor, on the other hand, gives shape to a restructuring plan that meets the formal requirements and contains the argument required by the Act.

In contrast to the accelerated arrangement procedure, the amounts obtained in the law-sanctioned enforcement procedure, at the time of the opening of the arrangement procedure, and not yet released, will be transferred to the system mass immediately after the provision of the opening of the arrangement procedure[29].

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The duration of the arrangement procedure is estimated to be from 6 to 10 months. When exceeded 15% the threshold of the disputed claims is expected to not be concluded within the short time limit for the accelerated arrangement procedure.

Therefore, the legislator introduced separate proceedings for those debtors who should conduct restructuring proceedings relatively quickly in the case of fewer disputed claims – accelerated contractual proceedings – and for debtors involved, for example, in litigation, which on the basis of which the entire restructuring process is extended – the arrangement procedure.

Despite many regulations common to these two The type of restructuring proceedings plays an important role in introducing a criterion that distinguishes between the discipline of the debtor in the pace of action and the protection of creditors' rights.

2.4. Sanction proceedings

The sanctioning procedure is dedicated to those entrepreneurs whose situation makes them unable to enter into an agreement with creditors in the framework of the procedures described above. Such cases may occur where creditors find that the debtor is unable to execute the proposed arrangement or arrangement proposals will not be acceptable to them, or in other proceedings the time to obtain funding is too short. The sanctioning procedure provides for specific legal instruments to significantly improve the economic situation of the company so that the proposed arrangement can be effectively implemented or creditors can be offered more favourable arrangement proposals. This type of restructuring procedure is characterised in particular by the possibility of:

• • withdrawal from adverse contracts for the debtor,
• • reducing employment to current needs,
• • the sale of unnecessary assets with effect from enforcement sales,
• • extending protection against the possibility of execution from all assets of the debtor,
• • taking from the debtor its own management and setting up a professional manager,
• • undertake restructuring measures before the creditors' meeting.

An application for a sanction may be made by the debtor and the creditor. The opening of a sanitation procedure, as well as the arrangement procedure, will be subject to a similarity of the debtor’s ability to meet the day-to-day costs and obligations arising from the opening.

When issuing a decision to open a sanitisation procedure, the court shall remove its own management from the debtor and appoint a manager to whom the licensed restructuring adviser is licensed.

‘It should be stressed that the person responsible and the need to obtain the approval of the judge-commissioner for the actions planned in the restructuring plan will ensure that the interests of the debtor are not protected at all costs but that the legitimate rights of not only creditors, but also employees and counterparties of the debtor are taken into account’ 30 .

Where the effective conduct of a sanctioning procedure requires the personal participation of the debtor or its representatives and at the same time provides a guarantee of sound management, the court may allow the debtor to exercise the management of the whole or part of the undertaking within the scope of normal management.[31].

Attention should be paid to the great possibilities of adapting the management of the company to the specific needs of the debtor and creditors. The purpose of these assumptions is to introduce a professional manager who, depending on the operational capacity of the debtor, will act with certain powers to improve the company's economic situation while ensuring that the rights to respect the interests of all participants interested in effectively carrying out the restructuring are implemented.

The sanctioning procedure is similar in many respects to the other restructuring procedures with additional legal solutions clearly indicated by the legislator which can be applied.

Namely, the administrator may withdraw from a mutual agreement which has not been executed in whole or in part before the date of the opening of the sanction procedure, with the agreement of the judge-commissioner, if the benefit to the parties resulting from this contract is indivisible.

If the parties to the mutual agreement are a divisible benefit, the administrator may withdraw from such a contract, to the extent that the benefit to the parties was to be carried out after the day of the opening of the recovery procedure[32].

Thus, the administrator is given powers similar to the powers of the receiver, which neither the debtor nor any other authority has in other restructuring proceedings[33]. Initiation of a sanitation procedure may therefore be an opportunity to conclude adverse agreements.

The effects of the receiver's withdrawal from the contract are partly governed by both the restructuring law and the applicable law.

If, therefore, the manager withdrew from the contract, the other party (the counterparty of the debtor in the restructuring) may:

• • require the reimbursement of the benefit provided after the opening of the sanitation procedure and before the declaration of withdrawal from the contract, if the benefit is in the debtor's assets;
• • if that is impossible, the other party may claim only claims for the performance of the obligation and losses incurred. These claims are not covered by the arrangement.

The fundamental question is whether restructuring such commitments will not create additional financial burdens.

The legislator used the term ‘losses incurred’, which means that the creditor will be entitled to a compensation claim both within the limits of damnum emergens (losses) and lucrum cessans (losses) in the event of an adequate causal link between the event and the damage (the burden of liability and the basis for determining the amount of compensation)[34].

It is therefore necessary to examine each time the consequences of the action taken under existing legislation. The legal analysis of the problems presented leads to the conclusion that derogations from the inception of the compensation obligation may arise from the contract itself, the provisions of the law, and other legal acts.

The effects of the case, i.e. events on which the debtor has no direct influence, should also be taken into account, provided that the damage would not have occurred if the undertaking had been duly implemented. In civil law, the responsibility for failing to perform or failing to execute the obligation is based on the principle of guilt.

For example, it is pointed out that the existence of force majeure is an innocent circumstance of the parties to the contract, and therefore the failure to perform contractual obligations for this reason does not give rise to liability for damages if a causal link is demonstrated between the non-execution of the contract and the occurrence of force majeure (vis Maior).

On the other hand, are not without relevance to the formation of the debtor's current obligations, but also to the accelerated arrangement, arrangement and sanctioning procedure, according to which the provisions of the agreement reserved in the event of an application for opening one of the proceedings in question or its opening, amendment or termination of the legal relationship to which the debtor is party shall be invalid[35].

„This regulation confirms the cognitive nature of the provisions of the Act. The Act has a monopoly on determining the impact of restructuring proceedings on the existence of legal relations. Neither the debtor nor its counterparty may modify or terminate legal relations in the event of restructuring proceedings’ 36 .

These regulations mean that the manager in the sanction procedure may take action to resolve the legal relationship in accordance with the interests of the debtor, e.g.

in the case of multi-annual contracts with financial consequences if they are broken outside the restructuring procedure or even in the case of contractual provisions preventing their interruption. ‘Provision Article 298 p.r. also applies to mutual agreements in which the provision of one of the parties is continuous.

In this case, the benefit of that party must be considered to have been made upon the commencement of the continuous service.

Such contracts (supply of water, energy, gas, receipt of uncleanness, but also rent or lease) shall therefore be binding on both parties until they have been terminated in a contractual manner by the manager or the other party, and the charges due for the period following the opening of the recovery procedure shall be included in the costs of the recovery procedure.

However, where their continuation is not economically advantageous for the sanctioning mass, the administrator, with the permission of the Commissioner-judge, may also waive them where, under the agreement, this would be unacceptable." 37 .

Thus, the debtor obtains, in connection with the implementation of the sanitation procedure, very strong legal instruments that interfere with the formation of mutual commitments and implementation of planned actions.

On the date of the opening of the recovery procedure, the assets for the operation of the undertaking and the property belonging to the debtor become the sanctioning mass[38]. On the opening of an enforcement procedure, the assets of the debtor forming part of the sanctioning mass shall be suspended by law.

Where necessary for the continuation of the business, the Judge-Commissioner may, at the request of the Management Board or the debtor, waive such activity. It is also unacceptable to initiate new executions against the sanctioning mass[39].

Far-reaching protection against enforcement in a sanctioning procedure prevents the satisfaction of claims even from those assets which have been charged in kind, e.g. with a mortgage or a lien, which is further influenced by the restriction of the right of creditors in relation to their ability to enforce from the contractual weight in the remaining restructuring proceedings.

Restructuring in the framework of the sanitation procedure may be limited to asset restructuring. Often, in the course of increased activity, the company acquires assets to develop its core business profile, but investment outlays are also made with a view to diversifying sources of income or capital investments.

In the event of a threat of insolvency and the implementation of the recovery procedure, it will be appropriate to carry out an audit of the assets and related costs. In a specific case, the disposal of assets that are not necessary for business activity and which generate high maintenance costs (e.g.

credit costs, taxes, insurance, etc.) will have a positive impact on the assumptions for the restoration of solvency as set out in the restructuring plan. Such action may also entail additional resources.

A winding-up sale in a sanction procedure may be made by the administrator if the judge-commissioner has given his consent in the order and has determined the conditions for disposal.

The subject matter of such sale may be real estate, movable property, rights, the combination of assets of the debtor or even an organized part of the debtor’s undertaking. The liquidation sale of the insolvency administrator has the same effect as the sale made by the insolvency administrator[40].

Act of 28 February 2003 Insolvency law (hereinafter: u.p.u.) regulates the sale made in the proceedings, referring to the effects of enforcement sales[41]. The effects of the sale made in the sanction procedure are therefore subject to the provisions of restructuring, bankruptcy and enforcement law.

As regards the effects of the sale of movable goods, reference is made to the provisions of the Civil Procedure Code[42]. In conclusion, the acquisition of movable goods from the syndicate takes place without any burden, so the lien on movable goods, the right of use, etc. expires.

However, purchasers are not entitled to claims for defects. The sale of property in this mode results in the expiry of, among other things, rights and personal claims disclosed by entry in the land register.

‘At the same time, the rights of a secured creditor in kind will be fully preserved, as the administrator will then be required to draw up a separate plan for the allocation of sums obtained from the sale of goods, receivables and rights charged with the mortgage, lien, registered lien, tax lien and maritime mortgage in accordance with the u.p.’ 43 .

De lege lat

The sanctioning procedure allows the debtor to carry out the recovery and to conclude the arrangement after the inventory has been drawn up and approved.

Sanctioning activities are legal and factual acts that aim to improve the economic situation of the debtor and are intended to restore the debtor’s ability to fulfil obligations, while protecting against execution[44].

The legal definition of such restructuring proceedings shall lay down the framework for the action to be taken on the basis of a restructuring plan drawn up within one month of the opening of proceedings by the manager acting in agreement with the debtor.

___________________________

2 Reasons for the project 9 October 2014 Restructuring Laws with draft implementing acts – hereinafter referred to as the justification for the project p.r.; http://orka.sejm.gov.pl/Druki7ka.nsf/0/2978B4B7B0ADFEFDC1257D78003BAB71/%24File/2824.pdf

3 R. Adamus, Restructuring Law. Commentary, ed. 2, Warsaw 2019.

4 Reasons for the project p.r., p. 8.

7 the Regulation of the Minister of Justice of 17 December 2015 on the establishment of a model voting card for approval of the arrangement (Journal of Laws of 2015, item 2215); http://prawo.sejm.gov.pl/isap.nsf/download.xsp/WDU20150002215/O/D20152215.pdf

8 Mr Zimmerman, Bankruptcy Law. Restructive Law. Commentary, ed. 6, Warsaw 2020.

9 R. Adamus, Restructuring Law... op. cit.

12 Reasons for the project p.r., p. 47.

16 Reasons for the project p.r., p. 49.

23 Reasons for the project p.r., p. 49.

24 Reasons for the project p.r., p. 52.

27 Reasons for the project p.r., p. 53 and 54.

30 Reasons for the project p.r., p. 55.

43 Reasons for the project p.r., p. 57.