New regulation – restructuring law act
On 1 January 2016 a new restructuring law act came into force, which is to execute the so-called “new chance politics” The goal of the newly introduced regulation is to, among others, protect entrepreneurship, workplaces, employees and creditors in case of emerging financial problems for companies. The aim of the new restructuring law, according to the intentions of its initiators, is to carry out restructuring proceedings with respect to a debtor’s business, and in consequence to prevent company liquidation. As is in the case of the so-called “consumer bankruptcy”, an entrepreneur will get a second chance.
The act introduces the following restructuring proceedings: on arrangement approval, expedited arrangement, arrangement, recovery, partial arrangement, and arrangement in bankruptcy. They will allow entrepreneurs in difficult financial situation (insolvent or in danger of insolvency) to efficiently introduce changes to the structure of assets, liabilities and employment in order to save the legal existence of the entrepreneur, and through this also the workplaces and economically efficient undertakings.
An vital element of the carried out proceedings will be a restructuring plan that should include, among other things: analysis of the reasons for the difficult economic situation of the debtor, presentation of the suggested business strategy of the debtor’s enterprise and information on the level and kind of the associated risks, description of the planned restructuring measures and the costs involved, timetable of the restructuring plan introduction, description of the methods and sources of financing, including the use of the available capital, sale of assets for the purpose of financing restructuring, financial liabilities of the shareholders and third parties, the size of assigned and requested state aid, prognosis of the financial results for the subsequent five years drafted in at least two variants.
The new restructuring law involves the establishment of the Central Restructuring and Bankruptcy Register. The register will serve the purpose of, among other things, publishing and announcing decisions, orders, documents and information on restructuring and bankruptcy proceedings. Through the register, it will be possible to file letters and documents and to execute deliveries. However, the Central Restructuring and Bankruptcy Register will start functioning no sooner than on 1 February 2018.
One of the key intentions behind the introduction of the new regulation is professionalization of the restructuring consultancy services market. Introducing the profession of a licenced restructuring consultant is to foster an increase of competence of the people and entities involved in such activity, especially within the scope of management competence, knowledge of economy and finance as well as law. Thanks to this, it will be possible to both fully make use of the mechanisms provided for in the restructuring law and also to offer comprehensive support to the debtor.
It is worth to note that alongside the introduction of the restructuring law act, the bankruptcy law was amended. What is of key importance, is the change of the definition of insolvency, which is a prerequisite for declaring bankruptcy. The new definition is based on inability to meet money obligations, and not on temporary difficulties in maintaining financial liquidity, as it used to be the case.
