Simplified Restructuring Procedure - Summary of the year of operation

More than one year after the introduction of the simplified restructuring procedure (hereinafter referred to as the UPR), it can be said that it was extremely popular and was often a form of recovery of the financial situation by debtors who had become insolvent. Only time will show whether the newly adopted solution in the form of an agreement approval procedure will be an equally common choice among entrepreneurs.

In response to the pandemic COVID-19 and the related economic consequences which it has caused, the possibility for entrepreneurs to carry out a simplified restructuring procedure was introduced.

At the time of implementation, the drafter indicated that the introduction of UPR was necessary due to the prediction that the pandemic COVID-19 will lead many economic operators to the need for rapid restructuring.

It was argued that legal solutions should therefore be introduced to simplify the restructuring maximum while maintaining optimal efficiency[1].

Agricultural industry is leading in opening UPR

The Court Watch Polska Foundation report "Simplified Restructuring Procedure – a report from the year of operation" shows that UPR was the most popular type of restructuring procedure among debtors. According to the study, in July 2020 initiated 30 UPR and June 2021 Now.

236 UPR, which increases the monthly impact of UPR by 687% during the year. Within first one year after the law was passed, 1251 open UPR, which constitutes 84% restructuring proceedings.

Another type of procedure was an accelerated systemic procedure (9%), then the recovery procedure (5%) and systemic proceedings (2%), in turn the procedure for approval of the system was least popular (<1%).

The largest number of proceedings were opened by companies from the area of jurisdiction of the District Court for Warsaw (211), and at least from the area of jurisdiction of the District Court of Legnica (6).

Less than half of the companies were companies operating in the form of one-man business, over one quarter were limited companies and third the legal form of the holding was agricultural.

The research showed that the most companies that announced the opening of the UPR belonged to the agricultural industry, as they were 1/5 debtors (21%), traders (18%) and companies belonging to other industries (29%).

In summing up the results of all the open simplified restructuring procedures in which an application for approval was submitted, the agreement was concluded in almost half of cases (48%). second half of the cases in which the application has been lodged have not yet been dealt with.

In turn 1/3 The proceedings were dismissed due to the absence of an application for approval of the arrangement within the time limit 4 months. About the others 220 there is no information on the settlement.

The arrangement was most often concluded by debtors in the industrial processing industry (59%) and trade (46%) and the least in the case of debtors in the logistics industry.

Out of the 1251 proceedings initiated until mid-November 2021, has been removed 14% applications for approval of the arrangement.

The courts refused to approve the arrangement if the conditions of Article 165 restructuring laws, i.e.

where the arrangement was in violation of the law, if it was evident that the arrangement would not be executed when the debtor failed to fulfil obligations arising after the opening of the restructuring procedure, and where its conditions were grossly injurious to creditors who voted against the arrangement and raised objections.

In addition, the arrangement could not be approved if the debtor intended to repay the debt by liquidating the assets, which is an advantage of insolvency proceedings rather than restructuring proceedings.

The courts refused to approve the arrangement when the restructuring plan and the arrangement proposals were drawn up in a general, non-clad and incomplete manner.

Procedure for approval of the system

In place of the existing rules on simplified restructuring procedures, 1 December 2021 new rules have entered into force, in the form of a modified agreement approval procedure to increase the scope of the protection of the debtor and maintain the out-of-court nature of the proceedings. Although many of the solutions introduced in the simplified restructuring procedure were maintained in the procedure for the approval of the arrangement, including the ban on the debtor of execution and the ban on the termination of lease and lease contracts after the initiation of the procedure, the new regulation also introduced several changes.

Unlike the UPR, the notice of the opening of the agreement is no longer made by the debtor, and the supervisor after drawing up a list of claims which acquires the powers of the judicial supervisor.

The change also occurred in the publication of notices of initiation of the restructuring procedure. From 1 December 2021 The National Debt Register – a public, universal and free internet portal – was established in the form of the National Court Register, containing information about debtors, restructuring and bankruptcy proceedings.

This means that any restructuring advisor acting as supervisor is obliged to establish an account on the portal, for the purpose of communicating with the court during the proceedings.

The new rules also introduced a change in the exclusion of responsibilities for board members. They will be free of responsibility only at the time of the agreement's approval procedure, not at the time of the notice of opening the procedure, as was the case in the simplified restructuring procedure.

It is worth noting that, unlike the simplified restructuring procedure, the debtor will not be prohibited from repaying the debts he wishes to make the arrangement. However, most of the solutions adopted in the UPR were maintained in the new approval procedure.

Written by Milena Hęglewicz, legal advisor Russell Bedford Poland