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Gruia Dufuat Law Office presents: Insolvency Proceedings-New Rules

The Law n° 113/2020 approving the GEO no. 88/2018, published in the Official Gazette no. 600/2020, which came into force on July 11, 2020 introduces some important changes of the Law no. 85/2014 on insolvency prevention and insolvency proceedings.

For the record, the Law no. 85/2014 has been temporarily modified (during the state of alert) on May 18, 2020 by the Law no. 55/2020). The purpose of such modification was to support companies impaired by the Covid-19 pandemic.

Here below, there is a summary of the main legislative changes brought under the Law no. 113/2020.

 

  1. Increase of the threshold value for the opening of insolvency procedure – from lei 40,000 to lei 50,000

 

Le minimum amount of LEI 50,000 applies to both the debtor seeking to declare insolvency but also to the creditor seeking to open insolvency proceedings.

For salary receivables, the threshold value remains unchanged at six average gross salaries.

 

  1. Exclusion of the maximum percentage of the total fiscal debts of the debtor

 

A debtor is allowed to file for insolvency even if their budgetary debts are higher than 50% of the total amount of their debts. For the record, the provisions stating that the budgetary debts can not exceed 50% of the total amount of a debtor’s debts were repealed (final thesis, article 5 point 72 of the Law no. 85/2014).

This provision is beneficial for the debtor who, upon meeting the conditions provided for by the Law no. 85/2014 for filing for insolvency, has the obligation to file for insolvency within 30 days (such obligation is suspended during the state of alert in Romania).

 

  1. Possibility to challenge the professionals appointed by the court-appointed administrator

 

The Law no. 113/2020 ads the express possibility to challenge a lawyer, a chartered accountant, an assessor or any other professional hired by the judicial administrator, who is in conflict of interests and who would not abstain from interfering.

For the record, the former legal provision banned the appointment of a specialist on grounds of being in conflict of interests but there was no remedy for failure of observance of such interdiction. The interested party could challenge such expert based upon the general provisions of the Civil Procedure Code, but the jurisprudence was divided on this matter. From now on, there are no doubts, there is a legal text allowing that such expert is challenged.

 

  1. No enforcement for current claims right for current receivables due for payment for more than 60 days and extension of the payment term of payment request of the judicial administrator

 

Under the Law no. 113/2020, creditors are no longer allowed to initiate enforced recovery of receivables arisen after the opening of the insolvency procedure, a right priory stated by the GEO no. 88/2018.

In this case, a creditor who owns a current receivable must file a payment request for such receivable that is to be analysed by the judicial administrator.

What is new is the term in which the judicial administrator can settle the request of the creditor, term that has been extended from 10 days starting with the transmission of the request to 15 days starting with the date when such request is received by the court-appointed administrator.

For equity purposes, the legislator modified the way such term is counted, therefore the counting begins at the reception date by the judicial administrator and not at the date when it is sent by the creditor.

In this context, it is important to note that, according to the article 143 of the Law no. 85/2014, if in the reorganisation proceedings the debtor should not observe the reorganisation plan or if they accumulate debts towards the creditors, any of the creditors may ask for the opening of the bankruptcy proceedings. Such a request is to be ruled on in emergency and it can be dismissed if the requested amount is not paid up or if the debtor has concluded a payment agreement with the creditor for such amount.

The Law no. 113/2020 also brings clarification with respect to the payment agreement which is defined as the agreement concluded between the debtor and the creditor for the settlement of obligations in one or more instalments by deadlines other than those provided under contractual or legal provisions.

 

  1. Recording the contested budgetary receivables on the table of receivables

 

The law no. 113/2020 lays down that contested budgetary receivables (whose recovery hasn’t been suspended) can be temporarily recorded on the table of receivables until challenges are settled.

Such provisory recording of the budgetary receivables means that its holder can benefit from all rights provided for in law (including voting rights in the meetings of the creditors), with the exception of the right to collect amounts proposed for distribution.

Such amounts are blocked in the sole bank account of the debtor until settlement of the challenge by the judiciary authorities. For the record, the former legal provisions stated that contested budgetary receivables were to be recorded, under resolutive condition, until the challenge was settled.

The law no. 113/2020 also brings specific changes regarding the regime of credit institutions and investment companies, regulated under the Law 312/2015.

 

GRUIA DUFAUT LAW OFFICE

Attorneys at law (Paris & Bucharest)

www.gruiadufaut.com

 

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