The Romanian Ministry of Justice launched under public debate, until April 9th 2021, the new draft law regarding the preventive agreement procedure, which proposes an improved mechanism for the restructuring and financial recovery of the companies, meant to encourage the early preventive approach. The new project translates the EU Directive 2019/1023 into the local legislation and proposes significant amendments regarding the suspension of the enforcement procedure, according to ONV LAW specialists: the enforcement procedure may be suspended from the date of preventive agreement launch, in order to support the negotiations between parties (4 months, with extension possibility, under specific circumstances, to up to 12 months).
Thus, the new procedure of the preventive restructuring agreement proposed by the Ministry of Justice aims to improve the efficiency of the restructuring and insolvency measures in place.
“80% of the business environment representatives were in favor of a new restructuring – confidential and out-of-court – procedure, to encourage the early prevention of difficulties, the Ministry argues. This is a much welcomed relief for companies in the current pandemic context, in which especially the HoReCa sector as well as the entire distribution and logistic chain depending on HoReCa were hardly impacted,” Bogdan Frigioiu, Senior Associate at ONV LAW states.
In the global pandemic context, the local authorities registered an important change in companies` perception and reaction in 2020, with an increased volume of Romanian companies having chosen to access prevention mechanisms, such as the preventive agreement or the Government`s OUG 6/2019 for budgetary debts rescheduling. In 2020, the fixed assets value of the companies that accessed the preventive agreement increased to more than 1 billion euros, from 15 million euros in 2019 and this represents more than 71% of the total value of the companies in insolvency and restructuring last year. At the same time, the cumulated turnover of the companies impacting the economy that accessed the preventive agreement measure reaches almost 2/3 of the value of the companies that accessed the insolvency and restructuring procedure.
According to ONV LAW analysis, the new restructuring agreement procedure proposes a new „out – of -court” stage of negotiation. Among the most important aspects of the new legislation:
- The syndic judge intervention in the procedure takes place after the debtor obtained the vote of its creditors, in order to confirm the restructuring plan; this means a period of time offered by the law to the companies struggling with difficulties, to negotiate with their creditors;
- During the restructuring period, but not more than 3 years, the debtor`s activity will be surveyed by the restructuring administrator, an insolvency practitioner;
- The procedure is confidential, thus protecting the company from the failure stigma;
- New terms are introduced regarding the communication through electronic means, organization of online meetings with the creditors, organization of online auctions.
As compared to the current preventive agreement procedure, according to Law no. 85/2014, the new law project proposes amendments regarding the suspension of the enforced procedure: the enforcement procedure may be suspended from the date of preventive agreement launch, in order to support the negotiations between parties (4 months, with extension possibility, under specific circumstances, to up to 12 months).
After proposals submissions until 9.04.2021 regarding the draft legislation, this will be sent for approval to the Chamber of Deputies.