Law 216 of 14 July 2022 amends and supplements Law 85/2014 on insolvency prevention and insolvency proceedings and other legislation. The new law transposes the business prevention mechanisms introduced at European level by Directive 2019/1023.
The amendments to the insolvency law implement the business prevention mechanisms imposed by Directive 2019/1023 and clarify certain concepts and ways of action that were hitherto left to the discretion of the parties or to different interpretations by the courts.
The Ordinance, as amended by the Approval Act, applies to all insolvency proceedings opened after 11 July 2020.
By way of exception, the amendments concerning the time limit for the consideration of applications for payment of current claims, as well as those concerning the possibility of enforcement of current claims that are more than 60 days overdue, also apply to the applications for the opening of proceedings made in proceedings commenced after the date of entry into force of the Act, including those not resolved by the date of entry into force of the Act.
Also, the amendment concerning the determination of the due date of taxes related to possible reductions of claims as a result of the implementation of the reorganization plan from the date of the closure of the insolvency proceedings applies to all proceedings opened for debtors who at the date of entry into force of Law 216/2022 do not have an approved reorganization plan.
One of the main changes to the insolvency law is the introduction of the early warning procedure.
Under this new procedure, professionals are alerted by the tax authority to non-performance of certain obligations and are provided with information on the recovery solutions provided for by law free of charge via a website.
Thus, alert notifications are sent automatically via the electronic communication system developed by the Ministry of Finance/National Tax Administration Agency (ANAF) in relation to non-execution of obligations to the state budget, the state social security budget or the unemployment insurance budget.
The Ministry of Entrepreneurship and Tourism provides information and guidance on early warning on its website:
(a) detailed information on early warning and its role in signaling to the debtor the need to act without delay;
b) indicators for a general assessment of the financial situation with a view to diagnosing distress or insolvency, using available diagnostic software;
(c) systematized information, presented in a user-friendly format, on solutions for recovery, including insolvency prevention and insolvency proceedings, with the effect of discharging liabilities;
(d) a list of insolvency practitioners and the authorities and bodies exercising their supervision;
(e) information on programs and other support facilities.
In addition, the Ministry of Entrepreneurship and Tourism provides an early warning hotline for a general assessment of the business with a view to accessing recovery solutions.
A second important change relates to the insolvency prevention procedure.
If an insolvency proceeding has resulted in a final discharge, the debtor cannot access another insolvency proceeding within 12 months from the date of closure of that proceeding.
A debtor who, in the last 3 years prior to the filing of the application for confirmation of the restructuring agreement or the application for opening of the composition proceedings, has been convicted of an intentional offence against property, corruption, official misconduct, forgery, for the offences provided for in the Companies Act no. 31/1990, republished, as amended and supplemented, Act no. 129/2019 for preventing and combating money laundering and terrorist financing, as well as for amending and supplementing certain legal acts, with subsequent amendments and additions, Law no. 227/2015 on the Tax Code, with subsequent amendments and additions, Law no. 241/2005 for preventing and combating tax evasion, with subsequent amendments and additions, Competition Law no. 21/1996, republished, with subsequent amendments and additions, as well as for the offences provided for in Articles 240 and 241 of Law no. 286/2009 on the Criminal Code, with subsequent amendments and additions.
The fact that the debtor is in insolvency proceedings does not affect any of his rights or obligations under other legislation. Any disqualifications, limitations or prohibitions established by law in connection with the insolvency are not applicable, and contractual provisions in this respect are considered unwritten. The proposal of a restructuring agreement, the submission of a request for confirmation or confirmation of a restructuring agreement or the submission of a request for the opening of composition proceedings, the opening of such proceedings or the confirmation of a restructuring plan shall not ipso jure result in a change in the classification of the debtor’s exposures and the calculation of the provision, and the prudential regulatory frameworks shall remain applicable.
In the event of the debtor’s subsequent insolvency, the acts and operations reasonably and immediately necessary for the continuation of the debtor’s business until the date of the approval of the arrangement with creditors may not be cancelled, unless it is proved, in accordance with Articles 117 to 122, that they are fraudulent.
It should be stressed that the acts and operations envisaged include at least:
(a) payment of costs for the negotiation, adoption or confirmation of a restructuring agreement/plan;
(b) payment of costs for professional advice required in close connection with the restructuring;
(c) the payment of workers’ wages for work already done, without prejudice to other forms of protection provided for in Union or national law;
(d) any payments and transfers made in the normal course of business other than those referred to in points (a) to (c) above.
In the event of the subsequent insolvency of the debtor, the acts and operations carried out pursuant to the confirmed restructuring agreement or the approved composition agreement and those reasonably and immediately necessary for their implementation concluded during the restructuring period in the normal course of the debtor’s business may not be cancelled.
The two restructuring mechanisms provided for in the new law will have a positive echo in the market, being adapted to the permanent demands coming from the business environment, in the current economic context, by their simple and efficient nature but, above all, by the fact that they can be accessed much earlier and in a less bureaucratic and certainly faster procedure.
Last but not least, an essential aspect is that, by accessing the new insolvency prevention mechanisms, the entrepreneur will be able to keep control of his business while benefiting from the expert support of turn-around management professionals.
By Marius Ezer, Partner, NNDKP