How can we help?
We will do everything we can to protect the value of your business in times of market instability.
Together with your company, we will prepare a petition to initiate court restructuring which will provide protection against debt collection (including court enforcement) and against the termination of key business contracts and agreements.
We will appoint one of the largest and most reputable companies in Poland to act as an arrangement supervisor or court administrator - ZIMMERMAN FILIPIAK RESTRUKTURYZACJA S.A. (projects including among others: RUCH, KOMPUTRONIK, PIOTR I PAWEŁ, MOSTOSTAL).
We will advise you on how to manage liquidity and protect yourself in these difficult times.
We will help to protect members of the management board and their private property from personal liability for company debts.
We are one of the largest restructuring advisers in Poland. We are one of the few who hold the titles of the QUALIFIED RESTRUCTURING ADVISERS (dr. Patryk Filipiak, license number 624). We offer legal and business advisory services.
We offer comprehensive and professional restructuring advisory services for insolvent entrepreneurs and those threatened with insolvency, as well as for board members and creditors affected by liquidity problems of their contractors.
Our restructuring advisers have many years of experience in conducting complex bankruptcy and restructuring proceedings, including groups of companies with debts reaching several hundred million PLN.
We have the human resources at our disposal to handle restructuring and insolvency proceedings involving several thousand creditors. We have the know-how regarding management of communication channels with creditors, organization, course of and participation in the meetings of the creditors' committee as well as the creditors' meetings, and also the PR support for the debtor.
We prepare restructuring petitions, restructuring plans, inventory of claims and arrangement proposals.
We provide comprehensive legal, financial and tax services
1. What is insolvency?
Article 11 clause 1 of the Insolvency Law considers insolvency to be a state of loss of ability to settle liabilities as they fall due. These are due and pecuniary liabilities (insolvency is not an issue if the liability consists in the delivery of goods or the performance of construction works - however, insolvency may arise if we do not pay correctly calculated contractual penalties on time).
2. When does insolvency occur?
Determining when a state of insolvency occurs is not easy. The Insolvency Law has some tools which may be helpful in establishing it (the so-called presumptions).
Pursuant to article 11 clause 1a of the Insolvency Law, a debtor shall be presumed to be no longer able to pay its liabilities as they fall due if the delay in the payment of liabilities exceeds three months. In general, it can therefore be presumed that three months after failing to settle liabilities, the entrepreneur is already insolvent.
Insolvency can also be assessed from the balance sheet side. Article 11 clause 2 of the Insolvency Law indicates that a debtor who is a legal person or an organisational unit without legal personality in which a separate law vests legal capacity, shall be also considered insolvent if its liabilities exceed the value of its assets, and this condition persists for a period exceeding twenty-four months. In this case, insolvency is presumed to exist if according to the balance sheet, its liabilities, excluding provisions for liabilities and liabilities towards affiliated entities, exceed the value of its assets and the situation continues for more than twenty-four months.
However, these are only presumptions which can only be used auxiliarily when assessing a state of insolvency. If the entrepreneur already knows that due to e.g. the termination of key contracts it will not be able to perform its liabilities, it means that the state of insolvency has already occurred. It is therefore ill-advised to wait for the expiry of the periods indicated hereinabove.
3. How to protect yourself against insolvency?
If a debtor has not yet become insolvent but its economic situation indicates that it may soon become unable to perform its liabilities as they fall due, while reacting in good time to liquidity problems it can use the restructuring solution to be applied to its enterprise. Naturally, restructuring is also possible for debtors who have already become insolvent, although - as it is usually known - a debtor who has reacted well in advance to problems that arise has a better prospect of recovery of its business.
4. What is restructuring?
The aim of the restructuring proceedings is to avoid bankruptcy declaration of the debtor by allowing it to restructure by virtue of entering into an arrangement with the creditors. The arrangement is a kind of settlement between the creditors and the debtor. As a rule, the debtor proposes to its creditors the terms and conditions under which it intends to satisfy their claims, and the creditors accept or reject these proposals by voting. This may involve, among other things, partial redemption of liabilities, spreading out payments into instalments, deferral of payment or conversion of receivables into shares or stocks.
In the case of remedial proceedings (one of the types of restructuring proceedings), restructuring also involves carrying out recovery activities, i.e. legal and factual actions which aim at improving the economic situation of the debtor and are aimed at restoring the debtor's ability to perform its obligations, while simultaneously protecting it from enforcement.
Generally speaking, therefore, one can say that restructuring allows the debtor to satisfy its creditors and continue operations on the market, unlike insolvency which consists in the liquidation of the debtor's assets and in the vast majority of cases finishes with the end of the economic existence of the entity.
5. What are the restructuring proceedings?
Restructuring Law provides for four types of restructuring proceedings:
- arrangement approval proceedings
- accelerated arrangement proceedings
- arrangement proceedings
- remedial proceedings
The arrangement approval proceedings are the least invasive for the company structure and generally take place outside the court. The debtor concludes an agreement with the restructuring adviser for exercise of supervision over the course of the proceedings, collects the creditors' votes on the arrangement on its own and then submits a petition for the approval of the arrangement to the court.
Accelerated arrangement proceedings are one of the most frequent restructuring proceedings. As a rule, they should be completed within a few months. A court supervisor is appointed together with the opening of the accelerated arrangement proceedings who consents to the debtor's actions beyond the ordinary management.
Arrangement proceedings are not very popular among entrepreneurs. Arrangement proceedings last longer than accelerated arrangement proceedings and can be conducted only if the total amount of disputed claims of the debtor exceeds 15% of the total sum of claims giving the right to vote on the arrangement. A court supervisor is appointed therein.
Remedial proceedings are one of the most common in the statistics of conducted restructuring proceedings. They are characterised by a deep restructuring of the company and usually last not less than 12 months. An administrator is appointed in the remedial proceedings, and the debtor itself can be deprived of the right to exercise the administration over the enterprise. In practice, however, the debtor is allowed to administer all or part of the business enterprise to the extent not going beyond ordinary management, whereas activities beyond such scope are undertaken by the administrator.
6. Which restructuring proceedings to choose?
The choice of the appropriate restructuring proceedings depends on the specific case and requires a detailed legal and economic analysis of the business enterprise. The adjustment of appropriate proceedings depends on how deeply the restructuring will be carried out.
It is also worth emphasizing that not every procedure will be possible against a particular debtor, as the admissibility of some of them depends on the share of disputed claims. If the sum of such claims does not exceed 15% of the sum of claims entitling to vote over the arrangement, arrangement approval proceedings and accelerated arrangement proceedings may be conducted. If the sum of the disputed claims exceeds this value, it is permissible to conduct arrangement proceedings. On the other hand, the remedial proceedings can be conducted regardless of the amount of disputed claims.
7. Does the restructuring protect against enforcement?
It depends on the type of proceedings. The debtor does not obtain such protection in the arrangement approval proceedings. In the accelerated arrangement proceedings and in the arrangement proceedings, the protection against enforcement functions to a limited extent, as it is acceptable for the creditor to carry out enforcement against the collateral (e.g. mortgaged real estate or a pledged machinery), although such enforcement proceedings may also be suspended for a certain period of time. However, the remedial proceedings guarantee full protection against enforcement, regardless of whether it concerns enforcement of claims arising before the opening date of the proceedings or claims arising thereafter.
8. What are the benefits of restructuring?
Initiation of the restructuring proceedings (accelerated arrangement, arrangement or remedial) or the approval arrangement in the arrangement approval proceedings allows for protecting oneself from any negative consequences of failing to file bankruptcy petition on time. It should be noted, however, that it is not sufficient in this case to only submit a petition (as in the case of bankruptcy petition), but at least the court needs to issue a ruling - not being final though - regarding the initiation of restructuring proceedings or on the approval of the arrangement in the arrangement approval proceedings.
If the debtor applying for restructuring is already insolvent, the initiation of the restructuring proceedings must therefore take place within 30 days of the occurrence of the state of insolvency. It is not always possible to obtain a court decision on the initiation of restructuring so quickly, hence in practice it is often the case that a bankruptcy petition is filed simultaneously with a restructuring petition. The bankruptcy petition is not considered in this case, however the submission of the petition within the deadline allows to protect oneself from the consequences which we described in point 14. Naturally, an entrepreneur threatened with insolvency is in a better position, as in its case the deadline for filing a bankruptcy petition has not yet started its course.
The main benefit for the condition of the entrepreneur itself is the fact that the restructuring allows for “freezing” liabilities arising before the date of initiating the restructuring proceedings and their repayment under the conditions which, as a rule, are proposed by the debtor. The terms and conditions of the adopted arrangement will also regulate interest arising before the initiation of the proceedings and thereafter.
Depending on the specific restructuring proceedings, the debtor also receives, among other things, protection against enforcement and a guarantee that key contracts for the company operations will not be terminated. On the other hand, it is possible for a debtor to terminate unprofitable contracts and downsize under the same conditions as in the bankruptcy.
9. What is the court fee for filing a restructuring petition?
According to article 74 point 3 of the Act on legal fees in civil cases, the court fee for the petition for arrangement approval after collection of votes on one’s own or for the initiation of the restructuring proceedings is PLN 1,000.
In addition, the petitioner may be required to make an advance payment for expenses in the course of the proceedings in the amount of one-time average monthly salary in the enterprise sector without the payment of profit-related awards in the third quarter of the previous year, announced by the President of the Statistics Poland. The amount of this remuneration in the third quarter of 2019 was PLN 5,148.07.
An advance payment is obligatory when applying for the initiation of the accelerated arrangement proceedings. In the case of arrangement and recovery proceedings, the debtor can be obliged by the court to make an advance payment. No advance payment is made in the arrangement approval proceedings.
10. Who has to file for bankruptcy?
The obligation to file a bankruptcy petition lies with an entrepreneur conducting business activity individually or as a civil-law partnership.
If the debtor is a legal person or another organisational unit without legal personality in which a separate law vests legal capacity, this obligation is incumbent on anyone who pursuant to the law, articles of association or statutes, has the right to manage the debtor's affairs and to represent it, individually or jointly with other persons. This obligation is incumbent on each member of the management board irrespective of the manner of representation or the objection of another member of the management board.
In the case of the establishment of a succession management, it is the responsibility of the succession administrator to file a bankruptcy petition.
11. What is the deadline for filing a bankruptcy petition?
The bankruptcy petition must be filed no later than 30 days after the date of occurrence of the state of insolvency.
12. What is the court fee for filing a bankruptcy petition?
According to article 74 point 1 of the Act on legal fees in civil cases, the court fee for the bankruptcy petition is PLN 1,000.
In addition, the petitioner must make an advance payment for expenses in the course of the insolvency proceedings in the amount of one-time average monthly salary in the enterprise sector without the payment of profit-related awards in the third quarter of the previous year, announced by the President of the Statistics Poland. The amount of this remuneration in the third quarter of 2019 was PLN 5,148.07.
13. Can my creditor file for bankruptcy?
Yes. According to article 20 clause 1 of the Insolvency Law, a bankruptcy petition can be filed by any of personal creditors of a debtor. The act also introduces some facilitations for a creditor seeking to file for bankruptcy of its debtor. The creditor does not have to provide in the petition much detailed information about the debtor's assets, liabilities or court and enforcement proceedings, and it should only substantiate its claim against the debtor.
14. What are the consequences of not filing a bankruptcy petition on time?
Failure to file a bankruptcy petition on time can be very painful for the entrepreneur. In particular, the members of the management are exposed to liability for damages towards creditors. This liability is provided for in article 21 clause 3 of the Insolvency Law, article 299 of the Commercial Companies Code. The tax liability under article 116 of the Tax Ordinance is also in question, as well as the criminal liability referred to in article 586 of the Commercial Companies Code. Failure to file a bankruptcy petition on time can also lead to a ruling issued under article 373 of the Insolvency Law, i.e. on the prohibition to conduct business activity as a sole trader or within a civil-law partnership, to perform functions in company bodies, as well as a representative or proxy of a natural person conducting activity within the scope of this business, a commercial company, state enterprise, cooperative, foundation or association.