Will the simplified restructuring procedure stay with us for a long time?

In June 2020, with the entry into force of the so-called Shield 4.0, a new type of restructuring procedure was introduced, which was to be a temporary rescue for companies in a crisis.

The simplified restructuring procedure, although similar to the existing regulations on the procedure for approval of the arrangement, as being faster and more informal, quickly gained popularity among entrepreneurs.

Although the legislator assumed that these solutions were to be valid only during the ongoing epidemic, their unexpected success led to the creation of a project that would introduce similar tools to the legal order permanently.

In accordance with the recently published draft amending the act on the National Register of Debtors and some other acts (hereinafter referred to as the "the Act"), similar solutions are to become a permanent element of the Restructuring Law.

Opening the proceedings

In line with the legislator's assumptions, the proposed changes relate to the introduction of a new procedure for approval of an arrangement.

The proceedings will be opened by way of an announcement and will be carried out by the supervisor of the arrangement with whom the debtor has concluded an agreement to perform this function, and not by the debtor himself.

Importantly, the announcement on the determination of the arrangement date will be possible only after the list of receivables, the list of disputed claims and the preliminary restructuring plan have been prepared.

After the arrangement date has been determined, the arrangement supervisor will create and keep files in the ICT system supporting the court proceedings, which is to be another element facilitating the conduct of these proceedings.

Debtor protection

The Act also offers a number of tools to ensure the protection of the debtor. As in the case of the applicable regulations, during the proceedings, both the principle of suspending pending enforcement proceedings and the possibility of waiving activities carried out in the course of previously initiated enforcement proceedings will apply.

At the same time, not only the contracts previously listed in Art. 256 of the Restructuring Law, but also other agreements "of fundamental importance for running the debtor's enterprise", will be protected by the Act.

The arrangement supervisor will decide which contracts will fall into this category. Pursuant to the Act, the arrangement supervisor will prepare a list of contracts of fundamental importance for running the debtor's business, submitting it to the case file within 21 days from the date of opening the proceedings.

Duration of the proceedings

The Act, like the regulations in force so far, also introduces a maximum duration of proceedings for approval of an arrangement. Pursuant to the legislator's proposal, if the debtor does not submit an application for approval of the arrangement to the court within 4 months from the date of publishing the notice, the effects of the notice expire by operation of law.

The work on the Act confirms that the temporary solutions in the field of simplified restructuring proceedings have brought the expected results, and similar tools should be introduced to the restructuring law system permanently.

Although the new procedure for approval of the arrangement strengthens the position of the supervisor of the arrangement, which is to supervise the course of the proceedings, ensure its speed and efficiency, but provide the debtor with a number of tools for his protection.

The legislator assumes that this Act will enter into force on 1 July 2021, i.e. shortly after the regulations on simplified restructuring proceedings introduced under Shield 4.0 cease to apply.