Insolvency 2024 Comparisons

Previous Regime

Under the previous regime, which still applies to proceedings that were pending at the time of introduction of the new Insolvency Law (see below), there were three basic laws that applied to the restructuring and liquidation of business entities in distress.

Bankruptcy Code

The basic law was the Bankruptcy Code (Law 3588/2007, as amended), which included the recovery proceeding. This in-court restructuring proceeding required ratification of the recovery plan by the competent court provided that it was accepted by (i) the debtor (although this was not required if the debtor was in cessation of payments) and (ii) creditors that hold at least 60% of the debt and 40% of its secured debt. The Bankruptcy Code also provided for a post-commencement restructuring proceeding and a reorganisation proceeding that required the approval of creditors by the same percentages as the recovery proceeding and court ratification. The Bankruptcy Code also provided for a liquidation proceeding that could convert into a sale of the business or parts of the business as a going concern.

Dendias Law

The Dendias Law (Law 4307/2014) outlined a special administration procedure, where an expedited sale of the business, or parts of the business, as a going concern would take place provided that the debtor was in cessation of payments and the application was supported by creditors that hold at least 40% of total claims against the debtor, including at least one financial institution.

Out-of-court workout (OCW)

Finally, there was an out-of-court workout (OCW) proceeding (Law 4469/2017) that provided for the multilateral negotiation, between a debtor and its creditors, of a restructuring agreement that could receive court ratification. This OCW agreement involved an automated-platform-assisted negotiation that was open to all creditors whose claims were disclosed by the debtor. However, this proceeding was rarely used in practice and also involved a court ratification of the agreement in order to have an erga omnes effect.

The New Insolvency Law (Law 4738/2020, as amended)

Law 4738/2020 (the “new Law”), which came into force in part on 1 March 2021 and fully on 1 June 2021, introduced a wholly new regime and abolished the previous Bankruptcy Code.

Out-of-court workout (OCW)

The first available tool is the new OCW, which is entirely out of court. It is in fact a framework for the debtor to ask for a proposal from its creditors, when those creditors are credit institutions or servicers. That proposal may be formulated using an automated computational tool, the details of which are determined by a ministerial decision. If a majority of the credit institutions and/or servicers elect to make a proposal and the debtor agrees, then both the revenue office and the social security fund automatically participate in the settlement, as determined by the same automated computational tool. The only relief that can be provided under the OCW is a haircut or a rescheduling of the payment. The process is confidential and leaves all other creditors unaffected.

Recovery proceeding

The second proceeding is the recovery proceeding, which now incorporates the requirements of EU Directive 1023/2019 on restructuring and insolvency. This requires an agreement by the creditors, organised on the basis of two classes, the secured and all other creditors (including the State, social security funds and employees). The agreement of the debtor may not be required in circumstances such as the cessation of its payments.

Bankruptcy liquidation

The third proceeding is bankruptcy liquidation. This is a bifurcated proceeding for larger bankruptcies (everything except microenterprise bankruptcies and most consumer bankruptcies, which follow the small-scale bankruptcy process). At the time as the bankruptcy is declared, the court can decide whether to follow a going-concern sale of the business (or businesses) or to proceed with a piecemeal liquidation. For individuals, the law also provides for automatic debt discharge following the lapse of a three-year period following bankruptcy (in some cases reduced to one year).

The new Law introduces provisions for both voluntary and involuntary liquidation and reorganisation. 

For voluntary liquidation, any debtor who has ceased payments in a general and permanent way is required to file for bankruptcy within 30 days of the cessation of payments.

For involuntary liquidation, any creditor may file a petition to declare a debtor bankrupt if that debtor has ceased payments. The bankruptcy process can lead to either piecemeal liquidation or the sale of the business as a going concern.

In terms of voluntary reorganisation, the Law allows debtors who are either in cessation of payments or face imminent cessation of payments to pursue a pre-bankruptcy recovery process. The mere possibility of insolvency is also another ground for a debtor to file for a voluntary reorganisation.

Additionally, as discussed in section 1.1 Legal Framework, the new Law provides for financial restructuring of debts to credit institutions and/or servicers and the State (including tax and social security arrears) through the out-of-court workout (OCW) procedure.

Involuntary reorganisation allows creditors holding a qualified majority of claims to file for ratification of a recovery agreement, provided the debtor has ceased payments.

Moreover, as outlined in 1.1. Legal Framework, the new Law provides for a recovery proceeding that requires both creditor (and usually debtor) consent as well as court ratification. If the debtor is in cessation of payments, its consent to the recovery agreement submitted by creditors may not be required.

Finally, the Greek Code of Civil Procedure (Article 1034 et seq) provides for a receivership procedure if all other individual enforcement routes have proved ineffective.

The main role in bankruptcy is that of the administrator. The administrator must be a registered insolvency professional. In the context of recovery, the court may also appoint a special agent to perform specific duties. That person (legal or natural) must also be a registered insolvency professional.

The administrator is responsible for the management of the bankruptcy estate from the time of declaration of bankruptcy to its closure. Among other things, it is tasked with:

• performing an inventory of the assets constituting the estate, proceeding to their liquidation;
• in cases of going-concern liquidation, dealing with the business pending its disposal;
• seeking to set aside detrimental transactions during the suspect period;
• acting on behalf of the debtor in seeking to recover damages caused by management acting in breach of their duties;
• pursuing management that failed to file in a timely manner; and
• verifying creditor claims and distributing liquidation proceeds on the basis of the verified claims and their ranking under the law.

A special agent in recovery proceedings may be appointed to assist the debtor with the implementation of the agreement or to monitor the conduct of the business during the pendency of a stay order. A special agent may also be appointed by order of the bankruptcy court to vote in place of shareholders who hold out abusively against the implementation of the plan.

A bankruptcy administrator is appointed through the decision of the court declaring a bankruptcy, or, if the appointment does not take the form of an application or of an intervention at the hearing of the bankruptcy application, then the administrator will be appointed by the supervising judge.

The bankruptcy court, or the supervising judge in small scale bankruptcies, can remove the administrator for cause. The creditors’ assembly can also remove the administrator and appoint its replacement.

In a bankruptcy, the administrator takes over the debtor’s management, if the debtor is a legal entity, and assumes all its power and authority in respect of the debtor’s business and affairs.

The administrator is selected among registered insolvency professionals. Individuals can be certified as possessing the necessary skills for assuming the role of administrator or special agent (ie, to assume an office reserved for an insolvency professional). In the alternative, a professional firm can register as an insolvency professional if it engages certified individuals. Its appointment to a statutory office is conditional on using, for that purpose, a team that includes certified individuals. The law specifically refers to law firms, auditing firms and consulting firms as qualified to be registered as insolvency professionals (provided some additional requirements are also satisfied).

Creditors’ Claims

The types of creditors’ claims that exist under Greek law are set out below.

Secured claims

Secured claims are those that are secured by a right in rem over an asset of the debtor.

Privileged claims

Preferential/general privileged claims include:

• unpaid employee remuneration incurred in the two years before bankruptcy being declared and employment termination compensation, regardless of when it occurred, as well as lawyers’ fees that date up to two years before the declaration of bankruptcy, and claims for compensation of salaried lawyers owing to the termination of their contract for a salaried mandate, regardless of the time it arose;
• claims of the State arising from VAT and its surcharges;
• social security contributions that arose until the declaration of bankruptcy; and
• other claims of State or local authorities and their surcharges excluding VAT claims.

Unsecured claims

Unsecured claims are those that are not secured by a right in rem or do not enjoy a general privilege.

Subordinated claims

Subordinated claims include, for example, the claims of the shareholders to recover the share capital invested in a bankrupt legal entity. This means that they will be satisfied only in case that all creditors’ claims are paid in full from the bankruptcy proceeds.

Distribution of Proceeds and Payment Priority

Debts incurred before 17 January 2018

The Law of Civil Procedure in conjunction with the Insolvency Law provide that, for secured debts created prior to 17 January 2018, the proceeds from the disposition of the collateral, after deducting bankruptcy expenses, the administrator’s fees, and satisfying super-priority claims (see 2.2 Priority Claims in Restructuring and Insolvency Proceedings), are distributed in the following amounts: 65% among secured creditors, 25% among creditors characterised as having general privilege (for tax claims, social security arrears and employee salaries and compensation arrears) and 10% to all other unsecured creditors.

If there are no claims ranked under general privilege, 90% of the proceeds are applied towards the claims ranked under special privilege or secured claims and 10% towards unsecured claims.

If there are no claims ranked under special privilege or secured claims, 70% of the proceeds are applied towards the claims ranked under general privilege and 30% towards unsecured claims.

If there are no unsecured claims, one third of the proceeds are applied towards the claims ranked under general privilege and two thirds towards claims ranked under special privilege or secured claims.

Debts incurred after 17 January 2018

For secured debts created thereafter (ie, 17 January 2018), provided that the collateral was unencumbered before the new security was established and the pledge, pre-notation or mortgage was registered after that date, certain employee claims are satisfied in priority, followed by the claims of secured creditors. In each case, the claims within each category are satisfied in accordance with the rule of absolute priority (under Greek law, securities are ranked in terms of their temporal priority). The priority applicable to satisfaction of general privilege creditors is set out in the statute, while unsecured creditors are satisfied pari passu.

First of all, the bankruptcy expenses, the remuneration of the administrator as well as any group creditors’ claims (ie, those whose claims arose or relate to a time after the insolvency and originate from the administrator’s activity or are connected with parts of the insolvency estate) are deducted from the bankruptcy proceeds before the distribution to the creditors as described in 2.1 Types of Creditors.

Super-seniority claims include (i) loans or credit and goods or services provided pursuant to a recovery agreement and (ii) loans or credit and goods or services provided during the negotiation period, if provided within the terms of the recovery agreement, regardless of its ratification. In the latter case, loans or credit and goods or services must be provided up to six months before the submission of the recovery application to the bankruptcy court.

Super-seniority claims take precedence over all other claims, including secured claims, when it comes to satisfaction (except in case of secured debts created after 17 January 2018), provided that the collateral was unencumbered before the new security was established.

Security is generally divided between security for immovable property and security for movables, which also includes claims such as accounts or shares and intangible property.

Immovable Property

The following types of security are available for immovable property.

Mortgage

This is the basic form of security in relation to immovable property. In order to create a mortgage, a creditor must hold a title provided by law, a final court decision or a notarial deed. A mortgage is perfected by its registration in the competent Land Registry/Cadastre.

Pre-notation of mortgage

This is the most common form of security on real estate property and is created by a court order in the form of an injunction and is perfected by its registration in the competent Land Registry/Cadastre. It can be viewed as a conditional mortgage that can be converted into a full mortgage upon the debtor’s default and the award of the creditor’s claim by an unappealable judgment/payment order with retroactive effect as of the registration of the pre-notation order. Pre-notations are far more common than mortgages because court fees are significantly lower than the notarial fees that would be payable for the mortgage deed.

Movable Assets

The following types of security are available for movable assets.

Pledge

This is the most common form of security. A pledge on a movable asset ensures the preferential satisfaction of the creditor through a forced sale of that movable asset in execution proceedings. A pledge requires physical delivery of the movable asset to the pledgee.

A chattel mortgage

Pursuant to Articles 1 and 3 of Law 2844/2000, and also known as a non-possessory pledge, a chattel mortgage allows the debtor to retain possession and use of the movable asset, and to freely dispose of it, but it attaches to the asset and ensures that the creditor is preferentially satisfied through the asset’s forced sale, following the commencement of execution proceedings.

Floating charge

Pursuant to Article 16 of Law 2844/2000, a floating charge enables the debtor to deal with (and dispose of) the charged assets (as specified in the agreement) in the ordinary course of business until the occurrence of either a default or an agreed event that causes the floating charge to crystallise. Following crystallisation, a floating charge becomes a fixed charge (similar to a pledge) attaching to whatever movable assets are available at that time.

Retention or fiduciary transfer of ownership

This allows the creditor, until fully paid, to retain ownership of property or have ownership of property transferred to them, but not to dispose of that property. This occurs in two situations.

• It is common in sales on credit for the seller to retain ownership until full payment of the agreed-upon consideration.
• A debtor can conditionally transfer, to the creditor, the ownership of the movable assets to secure performance of its obligations, and once the obligations are fulfilled, ownership reverts automatically to the debtor; however, if the debtor defaults, the creditor must auction the movable asset and satisfy their claim through the proceeds of the auction.

Enforcement Procedure

Finally, the enforcement of security rights is governed by the Code of Civil Procedure. The creditor must have an enforceable title against the debtor in order to initiate enforcement proceedings. Enforceable titles are, among others, a payment order and a final and enforceable judgment. In general terms, a secured creditor has the right to force an auction of its security. The same can be done by any other creditor that proceeds to attach the asset that forms its security; however, the secured creditor is satisfied by priority from the proceeds of that auction.

Enforcement initiated by unsecured creditors is governed by the Code of Civil Procedure. The unsecured creditor must first obtain an enforceable title against the debtor. Once obtained, the creditor can seize the debtor’s assets, auction them, and claim satisfaction from the proceeds.

Before obtaining an enforceable title, unsecured creditors may apply for an interim order for a pre-notation of mortgage over the debtor’s immovable assets or seek a pre-judgment attachment over the debtor’s other assets. 

As the statutory restructuring processes are perceived as being time-consuming and procedurally complex, the development of out-of-court restructuring processes has long been identified as critical for the handling of private debt.

Institutions under the supervision of the Bank of Greece (banks, leasing and factoring companies, servicers, special liquidators) are required to enter into bilateral debt restructuring negotiations with their co-operative debtors when those debtors are facing difficulties. This process has produced modest results.

The authorities (as well as international lenders under the bail-out agreements with the Greek State) have also recognised that a multilateral out-of-court settlement framework could facilitate financial and other debt restructuring. This led to the introduction of Law 4469/2017, which created a negotiation framework supported by an electronic platform. Agreements reached via this process could be court-ratified. However, this process proved unwieldy and found little use.

The New OCW

The new Insolvency Law repealed Law 4469/2017 and introduced a new electronic negotiation platform that is limited only to the debtor, financial institutions, the tax authorities and social security funds. This new process allows financial creditors to discount or reschedule existing debt (the majority of creditors that are credit institutions or servicers binds any dissenting minority within the same creditor class, provided that it also includes at least 40% of credit institutions or servicers that hold security for their claims). If such a settlement is also approved by the debtor, then the tax and social security liabilities are automatically adjusted using an automated computational tool, the details of which are determined by a ministerial decision. In this way, the law provides for the participation of the State in an out-of-court restructuring as an inducement to a settlement offer by creditors that are credit institutions or servicers.

The new OCW process allows the majority of creditors that are credit institutions or servicers to bind dissenting lenders to haircuts or rescheduling of repayment of debt. This cram-down feature is projected in the new Law as a provision in the agreement to which creditors that are are credit institutions or servicers must accede if they wish to be part of the OCW process. Otherwise, it is not at all typical for credit agreements to provide for the majority to amend the terms of the agreement.

The OCW restructuring can be invoked against any financial or credit institutions that should accede in the OCW process as per the law as well as against the tax authorities and social security funds in the case of a cram-down, as mentioned in 3.1 Out-of-Court Restructuring Process.

Additionally, the state, social security funds, or credit institutions or servicers, as creditors, may initiate the OCW process by notifying the debtor.

Any debtor, individual or legal entity, engaged in a business activity may be subject to recovery proceedings provided that it is in cessation of payments or in imminent inability to pay its debts as they fall due. Even debtors not facing this situation can be subject to the recovery procedure, provided that the court considers it probable that the debtor will become insolvent, and insolvency can be lifted through the implementation of the recovery procedure.

The new Law provides for the ratification of a recovery agreement entered into between the debtor and its creditors. Such an agreement will be ratified by the bankruptcy court if it has the consent of the majority of creditors in each of the two classes formed in accordance with the new Law (more than 50% of the secured claims and more than 50% of the rest of the claims). These classes respectively include secured and all other creditors (including tax, social security and employee claims).

The agreement may also be ratified if agreed only among creditors in the event that the debtor is in cessation of payments. Ratification makes the agreement binding on all creditors.

The recovery procedure is guided by two fundamental principles: ensuring no creditor is left worse off and maintaining equal treatment for all creditors.

The new Law provides that a recovery agreement can be judicially ratified if it is signed by creditors representing over 50% of secured claims and more than 50% of other claims. If this majority is not achieved, secured creditors holding over 50% of secured claims can cram down on unsecured creditors if they obtain the consent of 60% of all creditors (in terms of the value of their claims). These percentages are based on a list of creditors compiled by an expert and based on the debtor’s books with a reference date not earlier than three months from the date of filing the agreement for ratification.

The agreement can include a rearrangement of the assets and liabilities of the debtor according to the new Law, which provides certain examples as guidance. For example, it mentions the reprioritisation of claims but only in favour of new money. If the creditor explicitly consents, a guarantor’s or co-debtor’s liability is limited to the value of the claim against the debtor, as such claim was reduced in accordance with the ratified recovery agreement.

Even though unknown claims are not taken into account for the calculation of the requisite majorities, the agreement can affect them as well as contingent claims and claims that will arise up to the date of ratification. The new Law expressly exempts claims secured by financial collateral from the effects of a ratified recovery agreement.

The object of the proceeding is to preserve the going concern (but not necessarily the entity of the debtor) in order to preserve value for the benefit of creditors as well as jobs, and to minimise disruption to the market (eg, to suppliers and other counterparties).

Interim and new financing can be provided to a debtor in a recovery proceeding for the purpose of preserving its viability or keeping it as a going concern.

The value of claims is an issue in the agreement, while the economic interest of a creditor is critical to assessing whether the no creditor worse off test imposed by law is respected in any given case.

Creditors may be called to vote on a proposed agreement, but the usual process is for the necessary majority approval to be reflected in the executed agreement, which is then filed for ratification. The procedure concludes with the ratification; however, the agreement can set conditions precedent for its coming into effect (eg, the approval by the debtor’s shareholders of debt capitalisation).

The application is followed (in principle after two months) by a hearing in which other stakeholders may intervene. The waiting period for issuance of the ratification decision varies but is usually not less than six months.

If the recovery agreement is ratified, then its provisions apply to all creditors, even those that dissent (including the cramming down of the unsecured as a class if they dissent but the majority requirements for ratification are otherwise satisfied).

Under the new Law, the consent of the Greek State and social security funds to the recovery agreement may be deemed to be given, even if they do not sign the agreement, under certain conditions (ie, the debt to each public law entity is less than EUR15 million, the “no creditor worse off” principle is respected, and the total debt owed to public law entities is less than the total debt owed to private creditors).

Prior to the filing of a recovery agreement for ratification, the debtor (with the support of at least 20% of the creditors in terms of the value of their claims and upon a showing that the protection is necessary as a matter of urgency) can ask for a stay of enforcement actions. Such a stay may be provided for up to four months and can be further extended to a maximum total duration of six months. Upon the filing, provided that another recovery agreement has not been filed previously, the debtor is entitled to an automatic stay of four months that can be further extended (usually to the date of issuance of the decision on the ratification application).

The recovery agreement ends when its provisions are implemented in full (such as transfer of assets, repayment of rescheduled claims, etc).

The involvement of the bankruptcy court in the ratification of the recovery agreement is critical in order to rule that the recovery agreement and the business plan, if implemented, will restore the viability of the debtor.

The fairness or equal treatment of creditors test is one of the two major tests for the ratification of a recovery agreement. Whether an agreement provides all creditors in the same position with the same treatment, except for discrepancies dictated by important commercial or social reasons, is up to the judgment of the bankruptcy court that is vested with the ratification of a recovery agreement.

Failure to observe the terms of the contract is subject to the rules applicable to contractual default, including as may be provided under the contract itself.

The statute provides that the non-performance of the debtor in accordance with the recovery agreement may be set as a condition subsequent to the agreement or a termination right to each creditor. In any case, if the debtor defaults in relation to a specific obligation, the non-defaulting counterparty may exercise its individual rights under the law and the contract (ie, repudiation and termination) and the creditor’s claims revert to their initial amount, as they were before the ratification of the recovery agreement, reduced by the amounts that they have already received.

Finally, if it is proved that the recovery agreement was a result of fraud or collusion between the debtor and a creditor or a third party, the agreement may be annulled following a petition filed by anyone having a lawful interest. As a result, the creditors’ claims revert to their initial amount, as they were before the ratification of the recovery agreement, reduced by the amount that they have already received. In rem securities and claims against co-debtors or guarantors, if lifted or written off respectively in accordance with the recovery agreement, are revived.

The debtor remains in possession during the pendency of an application for the ratification of a recovery agreement. To the extent protected by a stay, disposal of real estate or machinery is not permitted (with certain exceptions). The stay may also include other measures that, in the view of the court, will preserve its value. In other respects, the debtor can continue to operate its business.

Management of the debtor remains with its incumbent manager; however, upon the application of an interested party, the court can appoint a special agent to carry out some or all of the functions and responsibilities of management.

In principle, the debtor is free to borrow money during the pendency of an application for ratification of a recovery agreement.

In general, as already mentioned in 4.4 The Position of the Debtor in Restructuring, Rehabilitation and Reorganisation, directors and officers remain in control of a corporation after the ratification of a recovery agreement.

However, if it is provided within the terms of the recovery agreement, or following an application made by the debtor or any creditor, the bankruptcy court may appoint a special agent assigned with:

• preserving the bankruptcy estate;
• performing special managerial tasks; or
• supervising the implementation of the recovery agreement.

Shareholders of a debtor that is in cessation of payments cannot be an obstacle to the ratification of a recovery agreement. More specifically, if the debtor is a legal entity and the expert considers in their report that the residual claim of the shareholders against the company is not affected by the implementation of the rehabilitation agreement, then the execution and the implementation of the agreement do not require in any way the consent of the general assembly of the debtor’s shareholders. If need be, the court may appoint a special agent in order to vote in the general assembly instead of such hold-out shareholders.

Secured, preferential and unsecured creditors are affected by the automatic stay on enforcement measures against the debtor. However, the new Law explicitly provides that claims secured by financial collateral are not affected.

A court may provide temporary suspension of set-off rights but not their termination. The rule under bankruptcy, which also applies in a recovery proceeding, is that the declaration of bankruptcy does not affect the right to set-off provided that the conditions for its exercise existed prior to the declaration of bankruptcy. There are special protective provisions in Greek law for set-off under financial collateral and netting of position in listed derivatives (eg, they are not affected by a stay).

There are no restrictions on the trading of claims against the debtor during the pendency of an application for the ratification of a recovery agreement. Accordingly, the rules generally applicable to an assignment of claims would also apply in this case.

The law does not preclude existing equity owners receiving or retaining any ownership or other property.

Declaration of Bankruptcy

A debtor can apply to be declared bankrupt in the event that it faces imminent cessation of payments, while filing becomes mandatory in the event of an actual cessation of payments. The debtor’s cessation of payments is a necessary prerequisite for a bankruptcy filing by a creditor.

If the application is accepted, then the sum total of the debtor’s assets will constitute the bankruptcy estate and will be liquidated for the satisfaction of its creditors’ claims. Bankruptcies are divided into large and small categories regardless of whether the debtor is a merchant or a consumer, a legal person or an individual. For natural persons the categorisation is based on the value of the debtor’s assets. If the debtor is a legal entity and cumulatively meets the criteria of a microenterprise, it will be subject to the small-scale bankruptcy procedure.

Small-scale bankruptcies are tried by the magistrates’ court while larger scale bankruptcies are tried by the multi-member court of first instance, in each case in the appropriate venue. However, as of 16 September 2024 magistrates’ courts have been abolished and the single-member court of first instance has exclusive jurisdiction over small-scale bankruptcies. For enterprises, venue is determined by reference to the centre of main interest (COMI), while for consumers the venue is their place of residence.

A bankruptcy petition will include the nomination of an administrator (except for applications filed by the debtor, containing a statement that the placement of an administrator who accepts their appointment was not possible; in the latter case, the petition will be heard even without such a nomination) as well as the acceptance of such appointment by the nominee. The person nominated for that function must be an insolvency professional. At the petition hearing, other stakeholders may object to the nomination and nominate other professionals. The court is expected to defer to the nomination made by the largest creditor, but has the discretion to appoint another person if they are more suitable in its reasoned opinion.

Going-Concern or Piecemeal Liquidation

For bankruptcies of larger enterprises, the bankruptcy petition, if supported by 30% of the creditors in terms of the value of their claims, including 20% of the secured creditors, may include an application to sell the debtor’s business as a going concern (this may also be done in more than one constituent part, at the administrator’s discretion, subject to approval by the creditors’ assembly). In all other cases, a declaration of bankruptcy leads to the sale of the debtor’s assets piecemeal.

A going-concern liquidation is a public sale conducted by the administrator, on the e-auction platform provided for by law, that has no minimum price. The highest bid is then submitted to the approval of the creditor’s assembly. The assembly may decide to seek an improved offer or ask for the sale to be repeated. Assets that remain unsold after the lapse of 18 months are then sold piecemeal.

A piecemeal sale is always conducted on the e-auction platform (by a notary public) at a minimum price per lot (set by two certified valuers or one, depending on the value of the assets being liquidated). If the auction fails to produce a qualifying bid, the price is automatically reduced to ¾ of the original price and a repeat action is held 20 business days after the first one. If that auction is also unsuccessful, then there is a third attempt at a minimum price set at ½ of the original. If that also fails to produce a qualifying bid, the administrator is given four months to attempt to secure a negotiated sale at a price to be approved by the court. If that also fails, then there is a final auction at no minimum and any unsold assets revert to the debtor or are handed over to the State.

The only party that is excluded from participating in an auction or public sale is the debtor. There is no provision for credit bidding. There are also no provisions to either facilitate or pre-empt a stalking horse bid by a creditor. The purchase price at all auctions is payable in cash.

A pre-negotiated sale transaction is not possible in a bankruptcy liquidation. However, creditors that wish to effect pre-negotiated sales may opt for a recovery agreement as opposed to a bankruptcy petition in order to do so.

Administration of the Bankruptcy Estate

Once installed, the administrator will conduct an inventory of the assets and call for the announcement of creditors’ claims. The administrator is charged with the verification of such claims on the basis of the evidence received from the debtor (such as books and records) or such evidence as it may receive from the debtors upon its request. The verification table drafted by the administrator will then be used for the purposes of distributing liquidation proceeds and it will be subject to objections and corrections at a hearing to be held at a later point (indeed, more than once, depending on how the assets are liquidated). There is no express exclusion of contingent claims from the verification process.

A declaration of bankruptcy will normally divest the debtor from control of its assets. The new Law provides that in special cases the debtor may remain in possession but, at least in the past, that option was rarely (if ever) applied. Responsibility for the estate is vested with the administrator (or syndic). An administrator is a certified insolvency professional (either a natural person that has obtained the requisite certification or a professional firm that employs such certified professionals). The administrator is responsible for all matters relating to the development of the bankruptcy process and its timely conclusion, under the control of a reporting judge (also appointed by the bankruptcy court); the bankruptcy court itself for important matters and, for matters that are of particular significance to the creditors as a body, the creditors’ assembly.

Organisation of Creditors

The creditors constitute an assembly, which is one of the organs of the bankruptcy proceeding. Initially, this assembly is constituted on the basis of the list of creditors that accompanies the bankruptcy petition. After the verification of claims and the posting of the table of verified claims, the assembly is reconstituted on the basis of that verification table to include creditors whose claims have been verified, and it will also reflect any amendments that may arise as a result of creditor objections at the time of the distribution of liquidation proceeds.

The assembly is convened by the reporting judge and is quorate if at least 50% in terms of value participate. Decisions are taken by a majority of the creditors represented at the meeting(s). They have the right to follow the development of the process leading up to the final accounting by the administrator at the time of closure of the proceeding and to compel the provision of information by the administrator. The assembly has the final word on going-concern sales and can ask for the extension of the process at the five-year term.

There is no provision for the reimbursement of creditor expenses relating to their participation in the assembly. In addition, there is no provision to constitute creditor committees.

Existing Contracts

The declaration of a piecemeal bankruptcy will lead to the automatic cancellation of all contracts, 60 days after the declaration, except for those that the administrator opts to maintain in force in the interests of the bankruptcy process or the maximisation of the value of the estate. In the case of going-concern liquidations, the bankruptcy does not entail the automatic termination of pending contracts, but the counterparty has 30 days to provide the administrator with the option to elect whether to continue performance or not. If the administrator fails to respond promptly, or elects not to continue, then the counterparty may terminate and seek damages, if applicable, as a bankruptcy creditor. The administrator may also elect to assign the debtor’s performance and benefits to a third party and the court may oblige a dissenting counterparty to continue its performance upon a showing that there is no harm to the counterparty and that the assignee has the ability to perform as required by the agreement.

Creditor Notification

Creditors are entitled to a semester report by the administrator. In addition, the creditors’ assembly may compel the administrator to provide it with additional information.

Estate Value Distribution

The proceeds of liquidation are distributed to the creditors in one or more distributions until all assets have been disposed of. At that time, the administrator will give a final accounting to the creditors’ assembly, which can release the administrator from any liability for the conduct of the process. The process ends in a court decision or upon the lapse of five years from the date of declaration for larger bankruptcies or 12 months for the small-scale bankruptcies. For larger bankruptcies, the five-year term may be extended by the court if there are pending decisions on creditor objections relating to the distribution of proceeds, or by a decision of the creditors’ assembly, on one occasion and for up to two more years.

The bankruptcy court, upon the submission of a report by the reporting judge and after hearing the administrator, may declare the termination of bankruptcy proceedings if continuation is rendered impossible due to insufficient funds or the absence of readily liquidatable assets. This declaration may be made upon the request of the debtor, a creditor, the syndic, or ex officio.

In such a case, the bankruptcy is deemed concluded, and the debtor regains control of their assets. Creditors may pursue individual enforcement actions, unless the debtor has been discharged, and the roles of both the administrator and the reporting judge are terminated. These effects come into force one month after publication of the court’s decision.

Additionally, under any other circumstances, these effects will automatically occur five years after the declaration of bankruptcy.

The declaration of bankruptcy stays all enforcement actions against the debtor, except for individual enforcement by secured creditors. The new Law provides them with a nine-month window, post-declaration, to commence such enforcement. If they fail to do so, then the stay applies to them as well.

However, if the decision that declares bankruptcy provides for a going-concern sale, and the encumbered asset is part of the estate that is going to be liquidated, the stay is imposed on secured creditors as well. If the going concern sale (or the sale of the separate operational business units) is completed in accordance with the provisions of law, the suspension of the secured creditors’ individual enforcement rights is lifted. The lifting of the stay may not exceed a period of nine months, starting from the completion of the process. If the going-concern sale does not produce a sale within 18 months of bankruptcy, it converts into a piecemeal sale. In that case, the secured creditors may commence individual enforcement measures within nine months of the completion of the going-concern sale and the initiation of the piecemeal liquidation. In the case of foreclosure made by a secured creditor, the lifting of the suspension is valid until the sale of the secured asset through auction.

The right of set-off is not affected by a declaration of bankruptcy if the set-off requirements were satisfied prior to such declaration.

Shareholders, if they are creditors of the debtors and not for their residual claim, have the same rights as any other creditor. It should be noted that the new Law, as amended, provides a set of rules for the annulment of transactions contemplated during the period from the cessation of payments to bankruptcy declaration, and which were damaging to the creditors’ interests.

Law 3858/2010, which implemented most of the UNCITRAL Model Law on Cross-Border Insolvency, introduced the prospect of recognition of foreign insolvency proceedings as well as co-operation between Greek courts, foreign courts and liquidators in different jurisdictions.

The European Insolvency Regulation (Regulation EU 2015/848) is directly applicable in Greece as Greece is an EU member state.

Governing law as well as the treatment of foreign decisions or rulings are determined by Law 3858/2010 or the European Insolvency Regulation, as may be applicable.

The new Law uses the same criterion as the European Insolvency Regulation to determine the COMI. The COMI corresponds to the place where the debtor conducts the administration of its interests on a regular basis in a manner that is ascertainable by third parties. The new Law establishes a rebuttable presumption in the case of a debtor’s legal entity. A legal entity’s place of registered office is presumed to be the COMI, in the absence of evidence to the contrary.

All restructuring and insolvency proceedings are reflected in a single statute: the new Law. Articles 31–69 of the new Law refer to restructuring proceedings, while insolvency proceedings are governed by Articles 75–211 of the new Law. Each of those sections provides the criteria for the application of the respective proceeding.

Recognition of Restructuring and Insolvency Proceedings

Law 3858/2010, which implemented most of the UNCITRAL Model Law, introduced the prospect of recognition of foreign insolvency proceedings as well as co-operation between Greek courts, foreign courts and liquidators in different jurisdictions. To the authors’ knowledge, there are no reported cases in which a court has refused to recognise foreign proceedings. On the other hand, there are few judgments reported in which Greek courts have recognised foreign main proceedings and initiated secondary bankruptcy proceedings in Greece according to the provisions of the European Insolvency Regulation applicable to proceedings commenced in other EU member states.

Recognition of Foreign Judgments

The process for recognition of foreign judgments or rulings inside the Greek territory is governed by a variety of rules, which depend on the origin of each foreign judgment, and which are provided in several sources of law, such as the Greek Code of Civil Procedure (GCCP), EU Regulations (ie, former Regulation 44/2001, where applicable, as well as new Regulation 1215/2012), and the bilateral or multilateral international treaties to which Greece is a contracting party.

As for the general process of recognition, a distinction should be made between enforcement by virtue of EU law (meaning Regulation 1215/2012) and enforcement by virtue of the GCCP and bilateral/multilateral treaties. In the case of enforcement by virtue of EU Regulation 1215/2012, the foreign judgment is considered automatically enforceable in Greece and the interested party may proceed with the specific enforcement actions provided by Greek laws without any prior involvement of a particular court. However, in the case of enforcement by virtue of a bilateral treaty or the GCCP, the foreign judgment should be first declared enforceable in Greece by the competent Greek court, which is the single member court of first instance of the place of residence of the debtor or the single member court of first instance in Athens (the latter if the debtor does not reside in Greece).

Requirements for the enforcement of a foreign judgment

The governing rules for recognition, provided among the above-mentioned different sources of law (GCCP, EU law, bilateral/multilateral treaties), are not identical, but they have many similarities. More specifically, the basic requirements for the enforcement of a foreign judgment in the territory of Greece, based on the general terms of international treaties and GCCP rules are the following:

• In accordance with Greek law, the judicial authority that issued the foreign decision must have been competent to hear the case.
• The judicial decision under enforcement must already be res judicata and enforceable according to the law of the country of issuance.
• The judicial decision under enforcement must not contradict a final and definitive decision previously issued by a Greek judicial authority between the same litigants and regarding the same case – certain treaties even require the absence of a previous lawsuit between the same litigants and with the same subject matter within Greek territory.
• The enforcement of the judicial decision must not prejudice good morals or Greek international public order.
• If the judicial decision was issued in absentia (ie, in the absence of the litigant who lost the case), the latter must have been duly summoned before the competent judicial authorities, according to the procedure applicable for the party in the territory where the decision was issued (in general, the party that lost must not have been deprived of its right to defend and to participate in the trial). Certain treaties specifically provide that summons by simply displaying a notice on the litigant’s door is not considered proper, whereas other treaties provide for specific time limits for the due summons of the interested party.

Objections to the enforcement of a foreign judgment

Based on EU law (meaning Regulation 1215/2012), a foreign judgment must be automatically recognised in Greece unless:

• such recognition is manifestly contrary to Greek international public order in the member state addressed;
• where the judgment was given in default of appearance, if the defendant was not served with the document that instituted the proceedings or with an equivalent document in sufficient time and in such a way as to enable them to arrange for their defence, unless the defendant failed to commence proceedings to challenge the judgment when it was possible for them to do so;
• the judgment is irreconcilable with a judgment given between the same parties in the member state addressed;
• if the judgment is irreconcilable with an earlier judgment given in another member state or in a third state involving the same cause of action and between the same parties, provided that the earlier judgment fulfils the conditions necessary for its recognition in the member state addressed; or
• the judgment conflicts with (i) specific jurisdiction bases constituted by EU Regulation 1215/2012 for insurance cases, consumer contracts and employment agreements (where the policyholder, the insured, the beneficiary of the insurance contract, the injured party, the consumer, or the employee was the defendant), or (ii) the exclusive jurisdiction of a particular court to hear the case.

There is a uniform principle in all existing rules of the GCCP, the ratified treaties, and the EU law that the defendant may not proffer objections to the merits of the claim. However, the defendant may always maintain that, depending on the factual background of the case, the ruling of the foreign judgment contradicts Greek international public order and in that case the court can dismiss the request for enforcement. It should be noted that Greek law distinguishes between Greek internal public order (Article 3, Greek Civil Code) and Greek international public order (Article 33, Greek Civil Code). Greek international public order is narrower than Greek internal public order. Not all Greek mandatory provisions of Greek law are considered to fall within the notion of Greek international public order; therefore, the significance of this exception is relatively limited under Greek case law. Apart from Greek international public order, the GCCP also requires that the foreign judgment be aligned with Greek good morals.

It should be noted that the defendant alleging that the foreign judgment is not consistent with Greek international public order and/or that it is contrary to Greek good morals and in general abusive is a common pitfall in seeking enforcement of a foreign judgment in Greece. It is also common for defendants to make a judicial request for – and sometimes get – suspension of the respective proceedings within the Greek territory.

Enforcement remedies

In general, Greek law provides for the following enforcement remedies:

• obligatory delivery and restitution of movable assets, including debt instruments (via the necessary actions of the court bailiff);
• obligatory delivery and restitution of immovable assets, including real estate property, ships and aeroplanes (via eviction performed by the court bailiff);
• orders for specific performance, including physical actions, contractual declarations, return of a child (via the necessary actions of the court bailiff);
• money judgments (via seizure and auction of the seized property); and
• interim measures judgments (via the necessary actions of the court bailiff).

Thus, once a foreign judgment is recognised, the process for enforcement is as set out below.

First, the creditor must order the defendant to voluntarily comply with the foreign judgment automatically enforceable in Greece (if EU Regulation 1215/2012 is applicable) or the Greek judgment that recognises the foreign judgment and allows enforcement within the Greek territory (in all other cases). This official order is performed by the creditor via the service of an order for payment or compliance, which constitutes the first act of enforcement. In continuance, the creditor must wait for three business days and, if in that time nothing happens, the creditor may ask the enforcement officials (the court bailiff) to enforce the judgment against the defendant obligatorily via the means of enforcement provided under Greek law (ie, seizure and auction of real estate or movable property, seizure of claims, etc).

There are no reported protocols or other co-ordination arrangements reported for cross-border proceedings.

Foreign creditors are not treated differently in any way to domestic creditors in Greek proceedings.

Greek company law provides that the duty of the members of the board of directors of a joint stock company is owed to the company itself. The duty is to act exclusively in the interests of the company, and for the pursuit of the company’s long-term economic well-being. According to legal scholarship, prior to bankruptcy, management must adhere to the “duty of care of a diligent business person” for their decisions to be deemed justifiable. Legal theory stipulates that, once it becomes evident that the company is on the brink of insolvency, a higher standard of diligence is required.

Article 127 of the the new Law provides that a company’s management cannot ignore the interests of creditors when the company becomes insolvent, meaning that they must promptly file a petition for the declaration of bankruptcy so as to minimise further detriment to creditors as well as to new counterparties. The members of the board of directors who are responsible for any delay are severally liable for the damages caused to corporate creditors. Any person who induced the directors to breach their obligation to file promptly is also liable. The law provides that the damages are of two different types:

• loss of value of the estate due to the delay in filing; and
• loss to counterparties due to trading with them while the debtor is insolvent.

Members of the debtor’s management may also be liable to creditors if the cessation of payments is due to their gross negligence or intent, making them personally responsible for compensating any damages incurred by the creditors. That liability may also be extended to any third party that procured such grossly negligent or intentional acts or omissions.

The new Law provides that a delay in filing may be excusable if it is due to an attempt to negotiate an out-of-court workout or a recovery agreement in furtherance of the interests of creditors and other stakeholders.

The above provisions shall apply mutatis mutandis to any other legal entity where the law does not impose joint and several liability on partners for all corporate debts, including but not limited to limited liability companies (in Greek: etairia periorismenis efthinis), private limited companies (in Greek: idiotiki kefalaiouchiki etaireia), and shipping companies.

As mentioned in 7.1 Duties of Directors, according to Article 127 of the new Law, if the bankruptcy petition is not filed within 30 days of the company’s cessation of payments, the responsible members of the board of directors are personally liable to compensate creditors for any losses resulting from the reduction in insolvency proceeds caused by the delay, as well as any damages incurred by new counterparties during that period.

Claims against management for liability arising from a delay in filing for bankruptcy are only asserted by the bankruptcy administrator. The limitation period for the said liability is three years from the date it arises.

If the damages suffered by creditors due to the cessation of payments is due to management’s gross negligence or intent, the management’s members may be held liable for damages to the company’s creditors since each creditor’s claim is unique, grounded in distinct facts, and evaluated on an individual, case-by-case basis. The limitation period extends to ten years.

It should also be noted that, under Article 195 of the new Law, a natural person with joint and several liability due to their representative or administrative role in a debtor legal entity is released from liability for debts incurred during the suspect period or the 36 months preceding it. This exemption takes effect either 36 months after the bankruptcy petition is filed or 24 months after the bankruptcy is declared or filed under Article 77 paragraph 4, whichever is earlier, unless an appeal is filed within this time by any interested party. The suspect period is the time between the cessation of payments and the bankruptcy declaration or the presumed suspect period under Article 81 paragraph 2, in the case of filing under Article 77 paragraph 4, which is 30 days before the bankruptcy petition was filed.

Executive chairpersons, directors, general managers, managers, managing directors, administrators, and liquidators of legal persons and entities, as well as those who effectively manage or administer such entities, are personally and jointly liable for the payment of income tax, withholding tax, VAT, and the uniform property tax (ENFIA) owed by these legal persons or entities, regardless of when they are assessed. This liability also extends to interest, fines, penalties, surcharges, and any administrative sanctions imposed, provided the following conditions are met:

• the individuals held one of these positions either during the legal entity’s operation or at the time of its dissolution, liquidation, or merger;
• the debts arose during their term in one of these roles; and
• the debts in question have not been paid or have not been paid to the State due to the fault of these individuals.

Furthermore, the failure to pay certified tax debts constitutes a criminal offence, for which the company’s management is held liable.

If the debts are established following an audit, only individuals who met these conditions during the relevant tax year or period will be considered jointly and severally liable. In cases where the tax debts mentioned have been subject to an adjustment, joint and several liability will also apply to individuals who met the above conditions at the time when each instalment of the adjustment became due or when the adjustment lapsed. For amounts related to interest, surcharges, fines, and other financial penalties, liability will fall on those jointly and severally liable for the principal debt on which these amounts are calculated and imposed.

The same liability for the above-mentioned directors applies in case of non-payment of social security contributions owed to the social security fund.

Chapter 9 of the new Law establishes criminal liability for a company’s legal representatives in cases of fraudulent bankruptcy, concealment of assets, onerous transactions, undervalued disposal of goods, preferential treatment of creditors, or when they received advance payments exceeding the amounts authorised by the decision of the competent corporate body or as stipulated in the legal entity’s by-laws.

Management also bears criminal liability for non-payment of salaries and other employment obligations, including social security contributions.

Beyond liabilities arising from insolvency proceedings, directors can be personally liable for any wrongful acts or omissions that occurred during their tenure in managing or representing the company, as per the Greek Civil Code.

Finally, by virtue of Law 5122/2024, which transposed the Directive (EU) 2019/1151, any natural person who has been convicted by an unappealable court decision for – among others – the crimes laid out in Chapter 9 of the new Law mentioned above, is considered as a disqualified director who cannot be appointed (or cannot continue to be) as a director, board member or liquidator of a legal entity. The duration of the disqualification may last five years (in the case of a misdemeanour) or 15 years (in the case of a felony) from the time that the court decision becomes unappealable.

There are two categories of historical transactions, which precede the declaration of bankruptcy and can be annulled:

• those that are mandatorily set aside; and
• those that may be set aside.

Mandatorily Voided Transfers

Gratuitous transfers, or transfers in which the consideration is disproportionately low by comparison to the value of the transferred asset, are considered adverse to the creditors and are voided mandatorily. The same treatment is extended to:

• the payment of debts that are not due and payable;
• the payment of debts in a manner that is different from that under the corresponding agreement (except for debt to asset swaps between the debtor and a credit institution); and
• the grant of new security for existing indebtedness (or its refinancing).

Optionally Voided Transfers

Any other transaction may be voided if the counterparty was aware that the transferor was in cessation of payments and it was detrimental to the interests of the debtor’s creditors.

Nevertheless, certain transactions are not subject to annulment. These include:

• those in the ordinary course of business;
• those that are exempted by law from claw-back (ie, any mortgage or loan granted by a company under the Law of 17.07/13.08.1923 and Law 4001/1959 to secure a loan, any pledge or mortgage granted to secure claims from bond loans issued according to Law 3156/2003, the transfer of claims pursuant to Law 3156/2003 regarding the securitisation of claims, as well as the provision of financial collateral under such an agreement pursuant to Law 3301/2004);
• those in which the debtor received adequate consideration in cash; and
• those that are anticipated, or carried out, in the implementation of a court-ratified restructuring agreement, or which were reasonable and directly needed in order to secure a recovery agreement, such as the payment of advisor fees for the negotiation, approval or ratification of such an agreement.

The law also exempts listed derivative transactions from annulment under the insolvency provisions.

Look-Back Period

Historical transactions that preceded the declaration of bankruptcy can be set aside or annulled if they occurred during the suspect period, which may be set by the court up to two years before the declaration of bankruptcy. In the case of transactions that are mandatorily voided, that look-back period extends also to the six-month period prior to the commencement of the suspect period.

In principle, the setting aside of a transaction is the responsibility of the insolvency administrator who must apply for that purpose to the bankruptcy court. Nevertheless, creditors are not deprived of their right to claim the annulment of a transaction provided that the administrator fails to act within two months from receipt of notice. The claw-back action becomes time-barred one year from the day the administrator obtained knowledge of the transaction or, if this is sooner, two years from the declaration of bankruptcy.

Annulment claims may only be brought in connection with a declared bankruptcy and are not available in connection with the recovery proceeding.

In the event of the annulment of a transfer, any party who acquired an asset from the debtor is obliged to return it to the bankruptcy estate. If the bankruptcy court determines that the party acted with fraudulent intent in the transaction with the debtor, the court may compel that party to compensate any harm caused to the creditors’ interests.