Entry into insolvency proceedings

Insolvency proceedings – general framework / Pre-insolvency stage / Opening of insolvency proceedings – debtor’s application / Opening of insolvency proceedings – creditor’s application / Making applications for admission of claims / Challenges in insolvency proceedings / Cancellation of acts and/or transfers of assets / Liability for insolvency – Liability for personal assets

 

Insolvency proceedings – general framework

In Romania, the law governing insolvency proceedings is Law 85/2014.

Law no. 85/2014 defines insolvency as the state of the debtor’s assets characterized by insufficient funds available for the payment of certain, liquid and due debts, as follows:

• the debtor’s insolvency is presumed when he has not paid his debt to the creditor 60 days after the due date; the presumption is relative;
• Insolvency is imminent when the debtor proves unable to pay its debts when they fall due with the funds available on the due date.

Law 85/2014 defines “collective proceedings” as proceedings in which creditors participate jointly in the pursuit and recovery of their claims.

It also defines the two forms of the procedure: the general procedure and the simplified procedure (bankruptcy).

The Insolvency Act establishes an obligation for the insolvent debtor to apply to the competent court for the opening of insolvency proceedings within 30 days of the insolvency.

Failure to comply with this obligation, failure to file or late filing by the debtor of the application for the opening of insolvency proceedings, may give rise to personal liability of the person at fault, under the terms of the insolvency law, or may constitute, under the terms of the criminal law, an offence.

How we can help you

Our team has extensive professional expertise in insolvency proceedings, both in substantive insolvency cases and in all cases associated with insolvency proceedings.

In other words we provide legal assistance and representation within:

• applications for the opening of insolvency proceedings, both the application made by the debtor and the application made by the creditor;
• the creditors’ entries on the debtor’s creditors’ list;
• all the appeals provided for by the insolvency law (appeal against the debtor’s schedule of obligations, appeal against the decision of the general meeting of creditors, appeal against the measures of the administrator/judicial liquidator, etc.);
• actions for annulment;
• applications for the personal financial liability of members of the management and/or supervisory bodies and any other persons who have contributed to the insolvency of the debtor company;
• as well as in any other cases in which the debtor company is a party.

Specifically, the undersigned advises and provides legal assistance and / or representation to the debtor, creditors or other persons who are defendants in cases involving liability or actions for annulment.

Pre-insolvency phase

Our lawyers provide legal assistance and representation of the debtor from the pre-insolvency stage until the closure of the insolvency proceedings, either by removing the debtor from the Commercial Register or by closing the insolvency proceedings and taking all measures to reinstate the debtor in business, as appropriate.

The first step is to provide legal advice in the pre-insolvency stage so that, in collaboration with other collaborating professionals – insolvency practitioners and/or tax consultants (accounting experts) – we can analyse the viability of the company in order to determine its insolvency status.

In this respect, our lawyers, together with other specialists in the field, analyse the hypotheses whether the company is in a state of manifest insolvency or whether there are possibilities of recovery through restructuring of obligations and continuation of activity.

Opening of insolvency proceedings – debtor’s application

Step number 2 is to advise the professional in order to prepare the file to be submitted to the competent court of the application for the opening of insolvency proceedings and the documents that the legislator has provided as mandatory, with a view to the opening of insolvency proceedings by the syndic judge.

In order to open insolvency proceedings for a debtor company, Law 85/2014 establishes mandatory conditions.

The main condition is the insolvency of the debtor.

Law no. 85/2014 states that insolvency is the state of the debtor’s assets characterized by insufficient funds available for the payment of certain, liquid and due debts, as follows:

• the debtor’s insolvency is presumed when he has not paid his debt to the creditor 60 days after the due date; the presumption is relative;
• Insolvency is imminent when the debtor proves unable to pay its debts when they fall due with the funds available on the due date.

Another condition is the submission of the documents required by law in support of the application for the opening of insolvency proceedings.

The file drawn up for the opening of insolvency proceedings requires increased attention since the amendment of the insolvency law in order to introduce the sanction of the rejection of the application for the opening of the proceedings if the documents provided for by the legislator as being mandatory are not attached, at the latest by the first deadline set by the court.

In recent years the courts have been extremely rigorous in their examination of the documents submitted in support of the application for the opening of insolvency proceedings, and due to failure to submit documents or non-compliant filings, many insolvency cases have been rejected, so the opening of insolvency proceedings is nowadays a real challenge.

Our lawyers have extensive expertise in the field and can help you to prepare the file in accordance with legal provisions and court requirements so that the court’s decision is favourable.

 

Opening of insolvency proceedings – creditor’s application

The application for the opening of insolvency proceedings may be made by the debtor or by one or more of his creditors.

According to the provisions of Law no. 85/2014, any creditor entitled to request the opening of proceedings, i.e. who has a claim on the debtor’s assets that is certain, liquid and due for more than 60 days, in an amount greater than or equal to the threshold value (40,000 Ron), may file a request for the opening of proceedings against a debtor presumed to be insolvent.

As in the case of the debtor’s application, the first step for a creditor to apply to the court for the opening of insolvency proceedings against a debtor company is to examine the documents supporting the claim against the debtor and the conditions required by law for the opening of insolvency proceedings.

The second step is to provide legal assistance and representation of the creditor in court.

 

Formulation of claims

According to Law 85/2014, the creditor entitled to participate in insolvency proceedings is the holder of a claim on the debtor’s assets.

However, it is not sufficient to have a claim against a company in order to be able to participate in its insolvency proceedings and to acquire the opportunity to enforce its claim, but it is necessary that each creditor (with the exception of employees who are registered ex officio by the insolvency administrator/liquidator) files a request for admission of the claim with the court, within the time limit set by the insolvency judge, accompanied by the supporting documents, following the admission of which he acquires the rights and obligations provided for by the insolvency law.

By filing the statement of claim, the creditor seeks to obtain a title to participate in distributions of sums made as a result of the liquidation of the insolvent debtor’s assets or as a result of the reorganisation proceedings.

 

How we can help you

Our team with extensive expertise in insolvency, as a whole, provides legal assistance and representation to creditors to enforce their claims against their debtors.

 

Challenges in insolvency proceedings

The Insolvency Act regulates a number of challenges that may be lodged by creditors or interested persons, as the case may be, to enforce their rights and interests.

For example, an appeal against the debtor’s statement of claims, an appeal against the decision of the general meeting of creditors, an appeal against the measures of the administrator/judicial liquidator, etc.

 

How we can help you

In order to realize the rights of creditors or other interested persons involved in the insolvency proceedings, our team provides legal assistance and representation in these cases, in order to design a well-founded challenge and with respect, very importantly, of the deadlines and obligations established by law for the contestants, as well as before the courts.

 

Cancellation of acts and/or asset transfers

Over the years, a constant practice of debtor companies has been to attempt to transfer a large part, if not all, of their assets before applying for the opening of insolvency proceedings, thus leaving the company without any assets that could be subject to recovery in the insolvency proceedings and consequently leaving the company’s creditors without any chance of recovering, at least in part, their claim against the debtor.

In order to stop these practices, the legislator has regulated a legal instrument designed to abolish the acts and operations carried out by the debtor during the so-called “suspect period”, i.e. the two years prior to the opening of the proceedings.

This instrument is known as an action for annulment and concerns legal acts concluded by the debtor with third parties to the detriment of creditors, more specifically by defrauding them.

 

How we can help you

In these types of cases, our lawyers can provide legal assistance and representation to either the plaintiff or other defendants against whom the action for annulment is brought.

Liability for insolvency – Liability for personal financial responsibility

According to the provisions of Law 85/2006, the purpose of the law is to establish a procedure to cover the liabilities of the insolvent debtor.

In other words, the aim of the law is to maximise the assets of the insolvent debtor in order to maximise, if not fully, the debtor’s creditors’ estate.

One of the mechanisms regulated by the legislator in the insolvency law itself is the liability of persons who are identified as being guilty of contributing to the insolvency of the debtor.

The limits of such an action are laid down in the provisions of Law 85/2014.

 

How we can help you

Our team provides legal assistance and representation to both plaintiffs and defendants in such cases.

Additional information on insolvency proceedings