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Bucharest
January 27, 2022
BUSINESS

Draft on insolvency of administrative units, resumed ahead of IMF board meeting

Three years ago, in May 2010, the Boc Government approved a draft law that established that administrative-territorial units that can no longer pay debts older than 90 days that surpass 15 per cent of the local annual budget will be considered insolvent and the institution concerned will have to come up with a financial recovery and leadership restructuring plan. The draft was approved by the government but did not receive Parliament’s final approval in order to be implemented, although it represented a commitment taken before the International Monetary Fund (IMF).
Considering that the Fund’s board is about to meet in order to take a decision concerning its agreement with Romania, the government will introduce through emergency ordinance the rules based on which administrative-territorial units can become insolvent, Mediafax informs.
Just like in the form approved in 2010, the draft law establishes that the insolvency procedure will also be started if the institution no longer has the capacity to pay salaries for a period longer than 90 days. Within five days after the decision that declares insolvency is adopted, a “committee for financial crisis situations” will be formed through the prefect’s order and the leadership of the insolvent institution will no longer have the right to take any decision that would lead to a hike in financial obligations, to hire personnel, and to borrow funds, with the exception of re-financing loans. The financial crisis situation ceases when financial problems no longer appear for a period of 180 days. The state of insolvency is presumed in case of failure to pay liquid and exigible obligations older than 120 days and that surpass 50 per cent of the administrative-territorial unit’s annual local budget – without considering those that are in commercial litigation – as well as failure to pay salary rights for a period longer than 120 days.

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