Insolvency 2020

Last Updated November 19, 2020

Poland

Law and Practice

Authors



Rymarz Zdort is seamlessly continuing, under a new brand, the operations and legacy of Weil, Gotshal & Manges – Pawel Rymarz sp.k., the Warsaw branch of a New York-based law firm. The firm, and its 90+ attorneys and advisers, is well known for its involvement in some of the most high-profile and ground-breaking restructurings and transactions. For over 20 years, the firm has advised on the most notable restructurings of companies in Poland, which have involved incredibly complex reorganisations and insolvencies. The firm has extensive experience in handling both domestic and cross-border restructuring and insolvency cases, and its main focus is on significant restructuring matters involving large numbers of creditors and complex debt situations. The firm represents various stakeholders, including debtors, creditors and corporate governing bodies, and also has in-depth experience in representing distressed asset investors in restructuring and insolvency cases, as well as in advising on the purchase of receivables.

In 2016, a substantial legal reform was implemented in Poland, the aim of which was to create a modern and efficient insolvency and restructuring regime. The legal framework was significantly remodelled by way of the introduction of significant amendments to the Act of 28 February 2003 – the Bankruptcy Law (the “Bankruptcy Law”) and the Act of 15 May 2015 – the Restructuring Law (the “Restructuring Law”), which implemented innovative concepts and various types of proceedings.

COVID-19

In the first half of 2020, the number of the bankruptcy and restructuring proceedings was similar to that in the first half of 2019. The fact that the number of bankruptcy and restructuring proceedings is at a level similar to 2019 is surprising, especially in the context of the COVID-19 pandemic. The situation was primarily influenced by:

  • legal regulations set out in government programs; and
  • limited operations of courts since March 2019 due to the pandemic.

Analysts predict an increase of bankruptcy and restructuring proceedings in the coming quarters.

The current trends in Polish insolvency proceedings are primarily shaped by the effect of the COVID-19 pandemic. In response to this situation, a temporary new rescue measure was introduced into the Polish legal system – simplified arrangement approval proceedings. These proceedings may be opened regardless of whether the debtor’s bad financial condition is caused by the COVID-19 pandemic. It is significant that these proceedings are the only ones in the Polish legal system in which the debtor gains protection against its creditors without the court’s involvement. Although this procedure was introduced only as a temporary measure until 30 June 2021, it cannot be excluded that this procedure will be permanently introduced into the Polish legal system.

There are no records regarding restructurings outside of formal proceedings. Such processes usually take place in secret.

The main statutory regime governing Polish bankruptcy proceedings is the Bankruptcy Law which entered into force on 1 October 2003. Since then, Polish insolvency law has been undergoing a long-term reform process, including crucial reforms in 2016 (see 1 Market Trends and Developments). Therefore, Polish law is structured to formally separate the rules governing bankruptcy proceedings (Bankruptcy Law) from rescue and recovery procedures, which are set out in the Restructuring Law.

The Restructuring and Bankruptcy Law provides for restructuring and bankruptcy proceedings for entrepreneurs (both companies and partnerships) that are insolvent or with respect to which insolvency is threatened. Liquidation and reorganisation procedures for companies and partnerships that are not in financial distress are regulated in the Commercial Companies Code.

This guide covers only the procedures connected with insolvency.

Under the Polish Bankruptcy Law there are two types of bankruptcy proceedings: regular bankruptcy proceedings and pre-packaged bankruptcy sale proceedings (pre-pack). These proceedings may be initiated either by a debtor or any of its personal creditors.

Moreover, under the Restructuring Law there is a possibility of conducting five types of in-court restructuring proceedings, ie:

  • arrangement approval proceedings;
  • simplified arrangement approval proceedings (see 1 Market Trends and Developments);
  • accelerated arrangement proceedings;
  • arrangement proceedings; and
  • remedial proceedings.

Save for the remedial proceedings, all of the above-mentioned restructuring proceedings may be initiated only by a debtor. Only remedial proceedings may be initiated either by the debtor or any of its personal creditors (see 2.5 Requirement for Insolvency).

Polish Law does not regulate any out-of-court proceedings that may be initiated outside formal restructuring proceedings. This state of facts may change with the implementation of the European Directive on preventive restructuring in 2021. To date, creditors and debtors have tried to work out  the best practices in this regard on their own.

In the case of insolvency, a filing for bankruptcy is mandatory. Not only is a company is required to file for bankruptcy, but also any person who is authorised (under applicable law or the company’s articles of association) to conduct the affairs of or to represent the debtor, on their own or jointly with other persons (ie, each member of the management board). The above entities are required to file a bankruptcy petition within 30 days from the occurrence of the grounds for insolvency (see 2.5 Requirement for Insolvency). Failure to submit a bankruptcy petition may lead to personal or criminal liability of the persons required to file for the declaration of bankruptcy (see 10 Duties and Personal Liability of Directors and Officers of Financially Troubled Companies).

Personal creditors are entitled to commence involuntary proceedings, ie: bankruptcy proceedings or remedial proceedings in relation to their debtor, if such debtor is insolvent within the meaning of the Bankruptcy Law (see 2.5 Requirement for Insolvency).

Bankruptcy Proceedings

Bankruptcy may be declared only if a debtor is insolvent within the meaning of the Bankruptcy Law. Under the Bankruptcy Law, there are two separate grounds for insolvency:

  • liquidity test; and
  • balance sheet test.

Liquidity Test

A debtor is unable to pay its pecuniary overdue liabilities (the debtor is deemed to be no longer able to pay its debts as they fall due, if the delay in the payment of liabilities exceeds three months).

Balance Sheet Test

The debtor is also insolvent if its pecuniary liabilities exceed the value of its assets and this state of affairs persists for a period longer than 24 months. The debtor’s pecuniary liabilities are deemed to exceed the value of its assets, if according to the balance sheet its liabilities, excluding provisions for liabilities and liabilities towards affiliated entities, are higher than the value of the debtor’s assets and this state of affairs persists for a period longer than 24 months.

Restructuring Proceedings

Upon debtor’s petition the restructuring proceedings may be opened not only in relation to an insolvent debtor but also in relation to a debtor threatened by insolvency. The debtor is subject to a threat of insolvency if due to its financial situation, it is likely to become insolvent in the near future. However, a creditor may file for the remedial proceedings only if a debtor is insolvent (but not just threatened by insolvency).

The Bankruptcy Law includes specific regimes for certain entities, eg, banks, cooperative savings and credit unions, developers, insurance and reinsurance companies or bond issuers. Unlike the Bankruptcy Law, the Restructuring Law envisages specific statutory restructuring regimes only for two groups of entities, ie, developers and bond issuers.

The most sophisticated special bankruptcy and restructuring regime applies to banks. The bankruptcy procedure of banks is regulated not only in the Bankruptcy Law, but also by the Banking Act of 29 August 1997. An insolvent bank is obliged to inform the Polish Financial Supervision Authority about its insolvency, which makes a decision on taking over the insolvent bank by another bank, or on filing a motion to declare it bankrupt. Unlike the usual bankruptcy regime, the Polish Financial Supervision Authority is the only entity authorised to file the aforementioned motion, the debtor itself and its creditors cannot do so.

Also, banks are not eligible to be restructured under the Restructuring Law. In this respect, the regulations including a special resolution procedure for banks apply. These are the provisions of European Directive No 2014/59/EU, dated 15 May 2014, implemented into the Polish legal system by the Act on the Bank Guarantee Fund, Deposit Guarantee Scheme and Resolution, dated 10 June 2016.

As mentioned in 2.2 Types of Voluntary and Involuntary Restructurings, Reorganisations, Insolvencies and Receivership, Polish law does not regulate out-of-court restructuring, but it may change soon. From the perspective of the market participants, such processes are usually quicker and simpler than formal ones. The lenders, including banks, are usually supportive in the course of such processes, because also for them the most important thing is to protect the value of the debtor’s business. However, it is not necessary to conduct such process before a commencement of the formal restructuring or bankruptcy proceedings.

Standstill agreements are used fairly often because they provide time to work out the conditions for debt restructuring. Due to the voluntary/consensual nature of the out-of-court restructuring, all obligations and rights of participants in this process are regulated in the respective loan documentation. Usually, the debtor has many information obligations, however, each time their scope is determined by the parties.

From experience, creditor steering committees are rarely set up but, if established, their rights and obligations are agreed by the parties. Generally, collaterals are neither enforced nor changed in such processes. Only if the debtor has some unencumbered assets, the creditors may try to obtain additional collaterals.

New financing is usually provided by the equity owners or current lenders, usually on a super senior basis.

There is no legal framework regarding creditors’ duties in the course of the out-of-court restructuring. Although the Polish Banks Association has presented good practices of the restructuring processes, they are not binding.

Polish law does not envisage any kind of cram-down mechanism applicable beyond the formal restructuring proceedings. The basic assumption is that out-of-court restructuring is consensual and, therefore, implemented without judicial intervention or approval, pursuant to the contractual terms agreed by all parties. It is possible that such mechanism may be agreed by the parties, eg, in inter-creditors agreements. However, any haircut or deferral or payment usually requires consent of all lenders.

Mortgage is the most common form of a security created over a real estate which allows the creditor to enforce a pecuniary claim against the asset. The real estate owner’s declaration of will in the form of a notarial deed is required to create this security. The mortgage is established when it is entered in the land and mortgage register of the district court that has jurisdiction over the area where the real estate is located.

Pledges may be established over movable assets, shares, intellectual properties, receivables or bank accounts. Pledge may be established as:

  • an unregistered civil law pledge, which requires the pledged asset to be handed over to the pledgee (subject to limited exceptions); or
  • a registered pledge, which is a more common form as it does not require the handing over of the pledged asset to the pledgee.

A registered pledge is established upon its entry in a register maintained by the relevant court. In the case of registered pledges, a written agreement is required.

Special Pledges and Claims

Special types of pledges have been developed for specific assets. For instance, shares and other financial instruments, including bank accounts, are typically encumbered with financial pledges. Financial pledges may only be established in favour of certain institutions (including banks) and they do not need to be registered and require a less formal enforcement procedure. However, depending on the nature of the asset, additional entries in specific registers may also be required in case security is established.

Moreover, claims are often secured by security assignments. These are a less common form of security than mortgages or pledges and involve a transfer of ownership of the relevant assets or rights, including receivables, to the creditor. The transfer may take place once the agreement is concluded or may be conditional on a particular event (eg, an event of default).

Outside any Formal Restructuring or Bankruptcy Proceedings

If a debtor defaults on the payment of its secured obligations, the secured claims may be enforced in accordance with the agreement on the establishment of the relevant security (unless there are other inter-creditor agreements in place, such as a subordination agreement). Typically, a secured creditor is permitted to enforce claims upon the occurrence of an event of default indicated in the agreement.

Generally, a creditor may initiate enforcement proceedings against the encumbered asset. However, in the case of claims secured by a registered pledge, the creditor may also take over or sell the encumbered asset (if the provisions of the agreement provide for such possibility).

In the Course of Bankruptcy Proceedings

In bankruptcy proceedings the position of the secured creditors reflects the fundamental concept of the Bankruptcy Law, whereby due to the opening of bankruptcy proceedings creditors are not entitled to exercise their original legal rights against the debtor’s assets but only have a claim regarding the economic value of such assets.

Therefore, once bankruptcy is declared all enforcement proceedings against the encumbered assets are suspended automatically. The suspension of enforcement proceedings is also possible before the bankruptcy petition is assessed, however, a decision of the court is always required in this regard.

In the Course of Restructuring Proceedings

As a rule, secured creditors may conduct enforcement proceedings against the encumbered assets in the course of restructuring proceedings. There are a few exceptions to this rule – secured creditors are not allowed to enforce their claims against the encumbered assets within:

  • remedial proceedings;
  • simplified arrangement approval proceedings; or
  • arrangement approval proceedings or accelerated arrangement proceedings aimed at concluding a partial arrangement.

In the two last cases, secured creditors are not allowed to enforce claims against the encumbered assets, and their claims are covered by the arrangement also in the part in which such claims are covered by the value of the encumbered assets, even without their consent, provided that the debtor offers to such secured creditors either the full satisfaction of their claims or the payment of an amount equal to at least the value of the encumbered assets.

Registered Pledge

If claims are secured by a registered pledge and an arrangement concluded by the parties provides for a possibility of the taking over of the encumbered asset by a pledgee, there is a possibility to exercise this right in the course of bankruptcy or remedial proceedings (under certain circumstances).

Bankruptcy Proceedings

Secured creditors benefit from a priority position in bankruptcy proceedings (see 5.5 Priority Claims in Restructuring and Insolvency Proceedings). They are entitled to obtain payment from the liquated encumbered assets with priority before any unsecured creditors.

Restructuring Proceedings

As a general rule, arrangement proposals are filed by a debtor. The debtor may propose:

  • the division of claims into groups; and
  • the methods of satisfaction of each group of claims.

However, in general, secured claims in the part covered by the value of the collateral are not covered by an arrangement, unless the respective creditor has agreed to include such claims in the arrangement. Therefore, the debtor needs to seek a settlement with the secured creditors outside formal proceedings. Moreover, secured creditors have special rights to conduct enforcement proceedings (with some limitations; see 4.2 Rights and Remedies).

Within bankruptcy proceedings, only unsecured creditors are divided into four statutory classes (see 5.5 Priority Claims in Restructuring and Insolvency Proceedings). In restructuring proceedings, there is only one statutory division, namely into arrangement and non-arrangement claims. There are no statutory classes among the arrangement creditors. However, arrangement proposals may envisage the division of creditors into certain classes. Generally, such division (both in bankruptcy and restructuring) has an impact only on the extent of the satisfaction of certain claims.

The Polish Restructuring Law only distinguishes between arrangement and non-arrangement claims. Unsecured pre-opening trade claims are generally entitled to no higher priority or better treatment than other unsecured claims within restructuring proceedings. However, during the preparation of the arrangement proposals, the debtor may take into account that certain creditors are critical (irreplaceable) vendors.

In bankruptcy and restructuring proceedings, unsecured creditors have creditors’ participation rights. In the restructuring proceedings their main right is to take part in the creditors’ meeting and to vote on the arrangement proposals. Moreover, they may request that a creditors’ committee be established or file their own arrangement proposals (under certain circumstances).

In the Polish legal system, there are no grounds enabling a creditor to end bankruptcy or restructuring proceedings on its own. Nevertheless, a creditor may take actions aimed at disrupting or prolonging such proceedings, eg, by unjustifiably appealing against the decisions issued in the course of such proceedings. Generally, a creditor does not have the authority to stay or defer the liquidation of the debtor’s assets.

There is no such procedure regarding pre-judgments attachments under Polish law.

Bankruptcy Proceedings

The costs of the bankruptcy proceedings have the highest priority. The secured creditors’ claims are satisfied from the price obtained from liquidation of the encumbered assets, but a bankruptcy receiver may retain a maximum of 10% of such price for the costs of the bankruptcy proceedings

All non-secured claims are divided into four statutory classes. The general rule is that claims falling into a lower class may be satisfied only if claims falling into higher classes have been fully satisfied.

First class

The first class includes:

  • pre-opening claims under employment contracts;
  • social security claims for last three years before the declaration of bankruptcy;
  • claims that arose in the course of earlier restructuring proceedings (under certain circumstances, especially if the required consents were granted and bankruptcy was declared on the basis of a simplified bankruptcy petition); and
  • new funds for the execution of an arrangement (under certain circumstances, especially if bankruptcy was declared within a certain time period after the annulment of the arrangement).

Further classes

Further classes include:       

  • the second class of creditors – other unsecured claims, especially trade claims;
  • the third class of creditors – all interest calculated on claims satisfied in first and second category; and
  • the fourth class of creditors – shareholders’ claims regarding loans granted to the bankrupt within five years before the declaration of bankruptcy.

Polish Bankruptcy Law does not provide for a priority for taxes to the extent that they apply to periods prior to the bankruptcy proceedings (such claims are satisfied in the second category with the same priority as any unsecured trade claims).

Restructuring Proceedings

Polish law does not contain any provisions on the priority of claims in the course of restructuring proceedings (see 5.1 Differing Rights and Priorities).

Types of Restructuring Proceedings

Polish law does not provide for any proceedings similar to the British Scheme of Arrangement or the US Chapter 11 that are applicable outside any formal proceedings. However, there are five different types of restructuring proceedings aimed at concluding an arrangement with the creditors, under the supervision of a court and an insolvency officer, ie:

  • arrangement approval proceedings;
  • simplified arrangement approval proceedings (see 1 Market Trends and Developments);
  • accelerated arrangement proceedings;
  • arrangement proceedings; and
  • remedial proceedings.

Arrangement Claims

Generally, an arrangement covers:

  • all pre-opening personal claims, excluding, eg, claims under employments contracts; and
  • secured claims in the part in which such claims are not covered by the value of the encumbered assets.

It is significant that if secured creditors do not agree to include their claims in the arrangement, the debtor should seek settlement with them outside formal proceedings. The support of these creditors is very important for the success of the entire restructuring.

Differences

Despite restructuring proceedings essentially all having the same aim, they differ as regards:

  • their procedure of determining the list of claims;
  • the scope of protection against creditors (including protection against secured creditors);
  • the ability to apply any privileges (such as easier redundancy, sale of assets without encumbrances and termination of contracts);
  • permitted level of self-management; and
  • court involvement.

The general rule is that a greater extent of protection against creditors is connected with greater restrictions for the debtor, especially regarding the possibility of self-management.

Milestones

The conduct of certain restructuring proceedings differs. However, the milestones for each of them (except for arrangement approval proceedings and simplified arrangement approval proceedings) are similar, ie:

  • issuance of a decision to open restructuring proceedings, together with a decision on the appointment of a judge-commissioner and a court supervisor (or administrator);
  • preparation of key documents (restructuring plan, list of claims, list of disputed claims, etc);
  • vote on arrangement proposals;
  • approval of an adopted arrangement by a court; and
  • completion of restructuring proceedings once the approval of the arrangement is final and non-appealable.

Cram-Down

The arrangement is adopted and is binding in relation to all claims covered by the arrangement if it is supported by the majority of creditors who hold jointly at least two-thirds of the total value of claims. Where creditors are divided into groups, the same level of approval must be obtained in each group; however, failure to obtain the required majority in one or more of the voting group does not prevent the adoption of an arrangement as it can still be adopted if creditors representing at least two-thirds of the total sum of claims across the groups vote in favour and the outcome for creditors from the dissenting group is not less favourable than if the debtor was declared bankrupt. As a general rule, the majorities are calculated in relation to the voting creditors. Only in the case of arrangement approval proceedings are the majorities calculated in relation to all creditors.

The creditors may be bound by the arrangement even if they do not vote, unless such creditors have not been disclosed in the restructuring proceedings by the debtor. Also, if the disputed claim becomes undisputed at the stage of the execution of the arrangement (eg, as a result of a final judgement), it will be satisfied in accordance with the arrangement.

Methods of Restructuring

There are no limitations of the restructuring methods to be included in the arrangement, unless they are contrary to applicable law. The compliance of each arrangement with applicable law is assessed by the court when approving each arrangement. It is important to note that creditors have mechanisms to counteract the adoption and approval of an arrangement that is contrary to applicable law or detrimental to the creditors, eg, they may file objections.

Once the restructuring proceedings are opened or the arrangement is approved within the arrangement approval proceedings, enforcement proceedings regarding arrangement claims are suspended by operation of law. In certain cases, even secured creditors are not entitled to enforce their claims against collaterals (see 4.2 Rights and Remedies). Also, before the opening of restructuring proceedings, there is a possibility to suspend enforcement proceedings against the debtor’s assets; however, such suspension requires a decision of the court.

As a rule, in restructuring proceedings the debtor manages its assets under the supervision of a court supervisor (or administrator). However, in remedial proceedings, the debtor is generally deprived of self-management and the administrator is required to manage its assets (see 9.3 Selection of Officers).

There is no statutory prohibition on borrowing funds in restructuring proceedings (see 6.10 Priority New Money).

As mentioned in 5.1 Differing Rights and Priorities, the Polish legal system does not envisage any statutory classes of creditors in restructuring proceedings.

As a rule, creditors have the same rights in restructuring proceedings and each creditor represents itself individually. Creditors have certain information rights, in particular they have access to the court files.

However, the creditors’ interests may also be represented by a creditors’ committee. The judge-commissioner may establish a creditors’ committee that is responsible for the supervision of the debtor, and a court supervisor (or administrator) as well as the examination of the condition of the estate. The consent of the creditors’ committee is required to certain transactions, eg, taking out a loan or credit facility or the sale of real estate or other assets valued in excess of PLN500,000.

Only one creditors’ committee may be established and such committee must represent the interests of all creditors. Generally a creditors’ committee consists of five members and two deputies. A creditor or a group of creditors representing one-fifth of the total value of claims may propose a candidate for a member of such committee.

As mentioned in 6.1 Statutory Process for a Financial Restructuring/Reorganisation, if a voting group rejects the presented arrangement proposals, such group can be crammed-down under certain circumstances. In such situation, the arrangement is also effective for the dissenting creditors.

Polish law does not provide for any prohibition on the trading of claims after the opening of restructuring proceedings. However, a purchaser is subject to certain limitations within restructuring proceedings. In particular, voting rights arising from the claims purchased after the opening of restructuring proceedings are retained by the purchaser only if the seller made an announcement about terms and conditions in the official court gazette and the claims were sold to the entity that offered the highest price.

However, the provisions in this regard have been amended and changes to them will come into effect on 1 December 2020. Thereafter, as a rule, the purchaser will not have any voting rights under the claims acquired after the opening of restructuring proceedings.

There are no statutory grounds for the consolidated restructuring of companies constituting a corporate group. The general rule is “one company – one restructuring proceeding”. However, there is room for informal co-operation between court supervisors/administrators and judge-commissioners in the course of restructuring proceedings within one corporate group.

If a debtor is not deprived of self-management, it can continue to conduct business activity and, therefore, make use its assets. Any transaction exceeding the ordinary course of business requires the consent of an appropriate insolvency officer (arrangement supervisor/court supervisor/administrator). Moreover, the consent of a creditors’ committee or a judge-commissioner may be required, eg, in the case of the sale of significant assets or the lease of the entire enterprise (see 6.3 Roles of Creditors and 6.8 Asset Disposition and Related Procedures). However, if the debtor is deprived of the management of its assets, generally, the only person authorised to use such is the administrator.

The sale of the debtor’s assets in restructuring proceedings is permitted. Such sale is effected by the management board (in the case of self-management) or by the administrator (if the debtor is deprived of the management of its assets). The consent of the creditors’ committee or the judge-commissioner (if the creditors’ committee is not established) is required for sale of the debtor’s assets if their value exceeds PLN500,000.

As a rule, a purchaser does not acquire the assets free and clear from any encumbrances and obligations. However, in remedial proceedings there is a possibility to sell the debtor’s assets on conditions approved by the judge-commissioner, free and clear from any encumbrances and liabilities. It is disputable under Polish law as to whether the whole enterprise of the debtor may also be sold on this basis. It should be noted that secured creditors do not have the possibility to use its claims as currency in an auction of its collaterals or to act as a stalking horse in a sale process.

There is no formal obstacle to prepare a transaction earlier, ie, before the opening of restructuring proceedings, and complete such through a formal restructuring procedure, but only if all statutory requirements are fulfilled (especially regarding the required consents).

As a general rule, the secured creditor is not covered by an arrangement (see 4.3 Special Procedural Protections and Rights) and , not being bound thereby, it is not possible to affect the rights of the secured creditor in any way contrary to the wishes of the secured creditor.

The granting to a debtor of new financing in the course of restructuring proceedings is possible if a creditors’ committee or a judge-commissioner (if the creditors’ committee is not established) allows such. Such new financing may be secured by the debtor’s assets; however, such security requires the consent of the creditors’ committee or the judge-commissioner. Generally, such security cannot be established with higher priority than other claims that are secured over certain asset, unless a secured creditor with higher priority agrees thereto.

In all restructuring proceedings a list of claims is prepared; however, the procedure of preparing and approving such lists varies in different types of restructuring proceedings. As a rule, each claim should be described in detail on the list of claims, including the amount of each claim. However, the Polish legal system does not envisage the valuation of claims in restructuring proceedings.

Only in the case of secured claims, is there is certain kind of valuation. As mentioned above, secured claims are covered by an arrangement only in the part that is covered by the value of the encumbered assets. Therefore, in order to assess whether a secured claim is covered by the arrangement and in what amount, the valuation of the encumbered asset is required.

The main rule of the restructuring proceedings is the equal treatment of creditors. Therefore, an arrangement adopted by creditors should not be detrimental to them. In order to avoid such situations, each arrangement has to be approved by the restructuring court. The court may refuse to approve an arrangement if its terms are grossly unjust to the creditors that voted against the arrangement and filed the relevant objections.

In restructuring proceedings, the parties have a possibility to withdraw from a contract on general terms (both statutory and contractual; with some limitations envisaged in the Restructuring Law). However, in remedial proceedings an administrator has additional grounds to withdraw from any adverse contract, after obtaining the consent of the judge-commissioner. A right to such withdrawal regards only mutual contracts that have not been executed in whole or in part before the opening of remedial proceedings by any party.

If the administrator has withdrawn from the contract, the other party may request the return of the consideration fulfilled after the opening of the remedial proceedings, and before the statement on withdrawal from the contract is delivered. However, if this is not possible, the other party may only bring a claim against the debtor.

There is no possibility to release non-debtor parties from the liabilities automatically on the basis of the adopted arrangement. The arrangement impacts only on the debtor’s liabilities.

As a general rule, a set-off of creditor’s claims with the mutual claims of the debtor after the opening of the restructuring proceedings is permitted under the Polish Restructuring Law. However, there are some limitations in this regard.

Firstly, a set-off is not permitted during such proceedings if the creditor has become the debtor's debtor after the opening of the proceedings. Secondly, when one is a debtor of the debtor upon the commencement of proceedings, the creditor acquires a claim that arose before the opening of the proceedings by transfer or endorsement. Nevertheless, a transfer of a claim through subrogation does not impede the possibility of a set-off.       

A statement regarding the set-off should be delivered to a debtor (in the case of self-management) or to the administrator within 30 days from the commencement of proceedings or from the date on which the grounds for set-off arose.

During the performance of an arrangement, an arrangement execution supervisor is required to monitor whether the arrangement is being performed in accordance with its provisions. As a general rule, each creditor, debtor and arrangement execution supervisor may file a petition to annul the arrangement if the debtor does not comply with the terms of the arrangement or it is obvious that the arrangement will not be performed.

Equity owners retain their ownership of a company. There are no specific regulations affecting the ownership of a company in the case of formal restructuring proceedings. However, if an arrangement provides for a conversion of debt into equity and such arrangement has been adopted, there is a risk that the shares of the current shareholders will be diluted without their consent.

General Remarks

Bankruptcy may be declared only if the debtor is insolvent (see 2.3 Obligation to Commence Formal Insolvency Proceedings to 2.5 Requirement for Insolvency) and only on the basis of a petition filed by an authorised entity (bankruptcy proceedings cannot be commenced ex officio). There are two types of bankruptcy proceedings in Poland – regular bankruptcy proceedings and pre-packaged bankruptcy sale proceedings (pre-pack) where the debtor’s assets are sold once bankruptcy is declared. The main difference between them is the moment at which the debtor’s assets are sold. In regular bankruptcy proceedings, the debtor’s assets are usually sold within 12 to 36 months from the declaration of bankruptcy.

As a rule, in a pre-pack procedure the debtor’s assets should be sold once bankruptcy is declared or within a few months afterwards, at the latest. The most important advantage of the pre-pack is the protection of the value of the debtor’s enterprise against its loss during lengthy bankruptcy proceedings.

Bankruptcy Receiver

Together with a ruling on the declaration of bankruptcy, the court appoints a judge-commissioner and a bankruptcy receiver. The bankruptcy receiver manages the bankrupt’s assets and is required to sell such and then divide the obtained funds among the creditors. The debtor is deprived of the right to manage its assets.

List of Claims

Generally, creditors are required to report their claims to the bankruptcy receiver within 30 days from an announcement in the official court gazette. The bankruptcy receiver prepares a list of claims that is subject to appeal by the creditors and such list is approved by the judge-commissioner. Contingent claims are included in the list and are satisfied once the relevant conditions are satisfied.

Milestones

After the declaration of bankruptcy, the bankruptcy receiver is required to commence working on a list of claims and an inventory list. Moreover, a valuation of the bankrupt’s enterprise should be prepared. Theoretically, in regular bankruptcy proceedings the liquidation of the bankruptcy estate should be completed within six months from the declaration of bankruptcy (however, it is a rare to complete the liquidation of the bankruptcy estate within the prescribed deadline).

When the assets are sold, the bankruptcy receiver should prepare a division plan on the basis of which creditors’ claims will be satisfied. The only accelerated form of regular bankruptcy proceedings is a pre-pack procedure where the assets may be sold once bankruptcy is declared or within a few months afterwards, at the latest.

Enforcement Proceedings

Once bankruptcy proceedings are opened, all enforcement proceedings against the debtor’s assets are suspended by operation of law. Before the bankruptcy petition is considered, the enforcement proceedings may be suspended, but this requires the court’s decision.

Withdrawal from Contract, Right to Set Off

As a rule, a set-off of a creditor’s claims against the corresponding claims of the debtor is permitted under the Bankruptcy Law (with some limitations similar to those in restructuring proceedings; see 6.14 Rights Set-Off). A statement on the set-off should be delivered to the bankruptcy receiver no later than upon the submission of claims.

The bankruptcy receiver may withdraw from the mutual contract if the judge-commissioner allows such. In such case, the other party may submit its claims for payment and compensation for incurred losses to the judge-commissioner (generally, such claims are satisfied in the second class; see 5.5 Priority Claims in Restructuring and Insolvency Proceedings).

Right to Information

The court files of the proceedings may be accessed by anyone who has a legal interest, in particular all creditors. Therefore, creditors have a right to review the bankruptcy petition, rulings, the creditor’s submissions of claims, list of claims, the receiver’s reports, all correspondence addressed to the court, protocols of the creditors’ committee, etc.

The bankrupt’s enterprise or certain assets are sold by the bankruptcy receiver. Generally, a purchaser acquires the assets free and clear from any encumbrances and liabilities. A transaction may be prepared before the opening of bankruptcy proceedings (especially within a pre-pack procedure), but the formal procedures must be followed. Creditors have no options similar to the mechanisms of a credit bid or stalking horse within the sale process.

Similarly to restructuring proceedings, as a rule, in bankruptcy proceedings each creditor also represents itself individually. However, a judge-commissioner may establish a creditors’ committee that is responsible for supervision of a bankruptcy receiver as well as the examination of the condition of the estate. Approval of the creditors’ committee is required with respect to certain transactions, eg, selling the enterprise in separate parts and not as a whole or incurring loans or credit facilities and encumbering the assets of the bankrupt.

As in the case of restructuring proceedings, only one creditors’ committee may be established, and it needs to represent the interests of all creditors. A creditors’ committee consists of five members and two deputies. A creditor or a group of creditors representing one fifth of the total value of the claims can propose a candidate for a member of such committee. The creditors’ committee operates in accordance with its own by-laws.

Regulation (EU) 2015/848, which entered into force on 26 June 2017, applies to bankruptcy and restructuring proceedings initiated within the European Union. The opening of bankruptcy and restructuring proceedings in a Member State has an automatic effect in other Member States. The main insolvency proceedings are conducted in the Member State where the centre of the debtor's main interests (COMI) is situated. However, even if the main bankruptcy/restructuring proceedings are opened, secondary proceedings in another Member State, where a branch of the debtor is located, may be opened but its effects are then limited only to the assets situated in that Member State.

Poland has also concluded a number of international agreements and acceded to many conventions relating to civil procedure, in particular regarding the recognition and enforcement of foreign court judgments as well as legal aid and service, however, in most of these agreements, the application thereof to the insolvency proceedings was expressly excluded. As a result, the provisions of the Bankruptcy and Restructuring Law apply directly to relations with those countries that are not members of the European Union. As a rule, the recognition of a foreign judgment in connection with the opening of bankruptcy or restructuring proceedings is subject to recognition if:

  • it concerns a case that does not fall within the exclusive jurisdiction of Polish courts; and
  • the foreign judgment is not contrary to the fundamental principles of the Polish legal system.

Under Polish law co-operation between domestic and foreign courts is permitted. Therefore, courts are encouraged to cooperate, in particular regarding the bankrupt’s assets, the collateral established over the bankrupt’s assets and the satisfaction of certain creditors. In practice, such cooperation is often initiated by the insolvency officers.

A Polish law or judicial decision may not be contrary to Regulation (EU) 2015/848, which regulates the intra-EU recognition of bankruptcy and restructuring judgments. In non-EU cases, the Polish Civil Procedure Code and the Bankruptcy Law provide for the rules under which the recognition of such decisions is possible.

Foreign creditors are dealt with in the same manner as all other creditors.

Different statutory officers are appointed in different types of insolvency proceedings, ie:

  • in bankruptcy proceedings – a bankruptcy receiver;
  • in approval arrangement proceedings – an arrangement supervisor;
  • in simplified arrangement approval proceedings – an arrangement supervisor;
  • in accelerated arrangement proceedings – a court supervisor or an administrator (if a debtor is deprived of the management of its assets);
  • in arrangement proceedings – a court supervisor or an administrator (if a debtor is deprived of the management of its assets); and
  • in remedial proceedings – an administrator.

Moreover, in the case of arrangement, remedial and bankruptcy proceedings the court may appoint an interim court supervisor or an interim administrator before the restructuring or bankruptcy is opened. Once the arrangement is approved, an arrangement execution supervisor is required to oversee whether the arrangement is performed properly.

All of the above functions may be performed only by licensed restructuring advisors or qualified licensed restructuring advisors. A qualified licensed restructuring advisor is required if a debtor in at least one of the last two financial years:

  • employed at least 250 employees;
  • achieved an annual net turnover from the sale of goods or services exceeding EUR50 million; or
  • the total value of its assets exceeded EUR43 million.

The role of a bankruptcy receiver appointed in bankruptcy proceedings is different than the role of other insolvency officers appointed within restructuring proceedings (arrangement supervisors, court supervisors, administrators). This stems from the different goal of bankruptcy proceedings than that of restructuring proceedings. However, as a rule, insolvency officers (both in bankruptcy and in restructuring proceedings) are supervised by a judge-commissioners and creditors (in particular, by the creditors’ committee).

Bankruptcy Receiver

The main duty of a bankruptcy receiver is the winding up of the bankrupt’s business. The bankruptcy receiver liquidates and distributes the bankrupt’s assets to the creditors in accordance with the statutory order of priority (see 5.5 Priority Claims in Restructuring and Insolvency Proceedings). The bankruptcy receiver manages the bankrupt’s assets and takes all actions connected therewith.

Arrangement Supervisor

The role of an arrangement supervisor is limited to the preparation of an arrangement, including:

  • preparation of a restructuring plan;
  • co-operation with a debtor in the preparation of arrangement proposals;
  • preparation of list of claims and a list of disputed claims;
  • assistance in collecting the votes of creditors; and
  • preparation of a report containing a feasibility assessment of the arrangement.

From the approval of the arrangement until a decision in this regard becomes final and non-appealable, any transaction beyond the ordinary course of business requires the consent of the arrangement supervisor.

Court Supervisor

A court supervisor performs similar duties as regards the preparation of the arrangement. Moreover, from the opening of the restructuring proceedings until their completion or discontinuation the court supervisor’s consent is required to all transactions beyond the ordinary course of business.

Administrator

An administrator manages the debtor’s assets. Also, an administrator is required to fulfil all obligations connected with the preparation of the arrangement (similarly to a court supervisor).

Interim Court Supervisor and Interim Court Supervisor

An interim court supervisor or an interim administrator may be appointed by the court before the opening of bankruptcy or restructuring proceedings. The interim court supervisor or the interim administrator is appointed to secure the debtor’s assets and to present to the court reliable information regarding the debtor’s assets and its obligations.

If the interim court supervisor is appointed, its consent is required to any transactions beyond the ordinary course of business. However, if the interim administrator is appointed, the debtor is deprived of self-management.

Arrangement Execution Supervisor

An arrangement execution supervisor oversees the execution of the arrangement and submits a report in this regard to the restructuring court. Its main role is to file a petition to annul the arrangement if certain conditions are satisfied (see 6.15 Failure to Observe the Terms of Agreements).

All statutory officers in bankruptcy or restructuring proceedings may be selected only from among licensed restructuring advisors (see 9.1 Types of Statutory Officers). However, there are some limitations in this regard, eg, a creditor of the debtor or entities related to the debtor cannot act as statutory officers in bankruptcy or restructuring proceeding.

As a rule, statutory officers are appointed by the bankruptcy/restructuring court (except for arrangement supervisors in arrangement approval proceedings or simplified arrangement approval proceedings who are selected by the debtors and perform their duties on the basis of an agreement concluded with the debtor).

The court appoints such statutory officers on its own, however, in the case of the appointment of court supervisors or administrators, the debtor supported by a creditor or creditors who have at least 30% of the total value of claims (with some limitations) may propose a candidate. The court may refuse to appoint such candidate if the candidate does not guarantee the proper performance of its duties.

All statutory officers should cooperate with the debtor in the course of bankruptcy or restructuring proceedings in order to satisfy the creditors’ claims to the highest possible extent.

Statutory officers may be replaced. It is important to note that on the basis of a reform in 2016, creditors gained certain rights in this regard (a creditors’ committee or the debtor supported by a creditor or creditors who have at least 30% of the total value of claims (with some limitations) may file for a change of the court supervisor, the administrator or the bankruptcy receiver). Also, the court may decide on its own to remove or change the statutory office, eg, if the statutory officer does not fulfil its duties.

Duties of Management Board Members

The following comments relate to limited liability companies and joint stock companies, the most common legal types of entities conducting business activity in Poland.

If a balance sheet prepared by a management board shows a loss exceeding the sum of the supplementary and reserve capitals, increased by half (in the case of a limited liability company) or one-third (in the case of a joint stock company) of the share capital, the management board is required to immediately convene a shareholders’ meeting/general meeting in order to adopt a resolution on approving the continued existence of the company.

However, if the company is insolvent within the meaning of the Bankruptcy Law (see 2.3 Obligation to Commence Formal Insolvency Proceedings), each management board member is required to file for bankruptcy within 30 days from the occurrence of grounds for insolvency, at the latest.

Liability of Management Board Members

If the management board members fail to file for bankruptcy on time, they are liable to the creditors for any damage caused by the delay. Creditors must initiate separate legal proceedings to pursue such claims against the board members.

In the case of limited liability companies, the most popular claims are claims based on the basis of Article 299 of the Polish Commercial Companies Code. Management board members are liable for the debts of the insolvent company (debtor) if the debtor’s assets are insufficient to cover all debts, unless:

  • a bankruptcy petition was filed within the prescribed deadline or by that time a ruling on the opening of restructuring proceedings or on the approval of an arrangement in the arrangement approval proceedings was issued; or
  • the delay was not due to the fault of the management board member; or
  • the creditor did not sustain any damage (ie, even if the bankruptcy petition had been filed on time, the result for the creditor would not have changed).

If filing for bankruptcy seems premature, the management board of the insolvent company may decide to initiate restructuring proceedings. However, only the opening of restructuring proceedings, and not filing for the restructuring, exempts the management board member from personal liability. Therefore, in practice, in order to be exempt from potential personal liability, management board members often decide to file for bankruptcy and restructuring simultaneously (as a rule, the restructuring petition is considered as first).

A management board member may also face tax liability, criminal liability (eg, for the preferential treatment of creditors) and/or be disqualified from acting as a management board member in the future in other companies.

A management board member is liable towards a company, eg, for damage caused by an act or omission contrary to the law or the articles of association, unless he/she is not at fault. Claims in this respect include a claim against a certain management board member who caused damage to the company. As a general rule, such claims may be pursued by the company or by the shareholder (if a lawsuit is not filed by the company within one year from the date of disclosure of the damage).

However, if bankruptcy or restructuring proceedings were opened in relation to the debtor and the debtor is deprived of a right to manage its assets, such claims may be pursued by a bankruptcy receiver or an administrator. The creditors have no right to pursue such claims directly (neither within bankruptcy/restructuring proceedings nor outside such proceedings).

Polish law provides for a whole regime of claw-back period provisions. These include:

  • general rules (Actio Pauliana); and
  • specific regulations in this regard set out in the Bankruptcy and Restructuring Law.

The aim of these provisions is to ensure that creditors will be satisfied to the highest possible extent within bankruptcy or restructuring proceedings.

Therefore, if certain transactions (especially transfers of assets) were executed to the detriment of creditors within a prescribed time period before filing for bankruptcy or remedial proceedings, they may be challenged. Please note that such express regulations under the Restructuring Law are envisaged only in the case of remedial proceedings (there are no specific provisions in this regard as regards the other types of restructuring proceedings, however, in such proceedings it is still possible to bring an Actio Pauliana claim.

Actio Pauliana

Bankruptcy receivers, administrators and creditors have a right to challenge certain detrimental transactions within five years from their occurrence under the principle of Actio Pauliana. To successfully challenge a transaction on this basis, it must be proved that the debtor became insolvent as a result of the transaction (or became more “deeply” insolvent) and knew about the detrimental impact on creditors.

The relevant test also requires that the counterparty knew, or could have known having taken reasonable steps, of the detrimental impact (ie, the debtor’s insolvency). This awareness is presumed where the parties have an existing commercial relationship, but such presumption may be challenged.

Claw-Back Period in Light of the Bankruptcy Law

The time frames within which transactions can be challenged are related to the time of filing for bankruptcy. However, if bankruptcy was declared as an effect of the consideration of a bankruptcy petition filed within three months from the completion or discontinuation of earlier restructuring proceedings, the claw-back is calculated in relation to the filing for restructuring proceedings.

Under the Bankruptcy Law, there are two claw-back periods: one year and six months. Some examples of transactions that may be challenged in bankruptcy proceedings, if executed one year before filing for bankruptcy, include:

  • transactions concluded by the debtor for no consideration or where the value of the consideration rendered by the debtor in the transaction significantly exceeds the consideration received by the debtor;
  • transactions involving security granted if the debtor was not a personal debtor of the secured creditor and the bankrupt did not obtain any consideration or the security was created in exchange for consideration incommensurately low in relation to the value of the security provided; and
  • transactions involving security granted to secure a debt of a related party (eg, directors of debtor companies, their family members, related entities and shareholders; such security will be declared ineffective regardless of the value actually received by the debtor, unless the other party shows that no damage was caused to creditors).

A six-month hardening period applies to:

  • transactions with related entities that will be ineffective, irrespective of the value of the consideration obtained by the debtor, unless the related entity proves that no damage was caused to creditors; and
  • the repayment of a debt prior to its maturity or the granting of security to secure such debt which will be ineffective, however, a secured creditor can successfully argue that it did not know of the debtor’s insolvency at the time of the transaction, in which case the security may be preserved.

Claw-Back Period Under the Restructuring Law

Under the Restructuring Law, the claw-back period is one year and is calculated in relation to the filing for remedial proceedings. Presented below are examples of transactions that may be challenged:

  • transactions executed by the debtor for no consideration or where the value of the consideration rendered by the debtor significantly exceeds the value of the consideration obtained by the debtor; and
  • transactions involving security that was not granted directly in connection with the consideration obtained by the debtor.

Claw-back claims after the opening of bankruptcy or restructuring proceedings may only be brought by a bankruptcy receiver or an administrator. Generally, these officers are released from the applicable court fees, thus, such claims are brought rather often.

In other restructuring proceedings any creditor may bring Actio Pauliana claims.

Rymarz Zdort

ul. Emilii Plater 53
00-113 Warsaw

+48 22 520 4274

+48 22 520 4001

magdalena.pyzik@rymarz-zdort.com www.rymarz-zdort.com
Author Business Card

Trends and Developments


Authors



Rymarz Zdort is seamlessly continuing, under a new brand, the operations and legacy of Weil, Gotshal & Manges – Pawel Rymarz sp.k., the Warsaw branch of a New York-based law firm. The firm, and its 90+ attorneys and advisers, is well known for its involvement in some of the most high-profile and ground-breaking restructurings and transactions. For over 20 years, the firm has advised on the most notable restructurings of companies in Poland, which have involved incredibly complex reorganisations and insolvencies. The firm has extensive experience in handling both domestic and cross-border restructuring and insolvency cases, and it's main focus is on significant restructuring matters involving large numbers of creditors and complex debt situations. The firm represents various stakeholders, including debtors, creditors and corporate governing bodies, and also has in-depth experience in representing distressed asset investors in restructuring and insolvency cases, as well as in advising on the purchase of receivables.

The New Legislative Framework: General Note

In 2016, a substantial legal reform was implemented in Poland the aim of which was to create a modern and efficient insolvency and restructuring regime. The legal framework was significantly remodelled by way of the introduction of significant amendments to the Act of 28 February 2003 – the Bankruptcy Law (the “Bankruptcy Law”) and the Act of 15 May 2015 – the Restructuring Law (the “Restructuring Law”), which implemented innovative concepts and various types of proceedings.

The key objective of the legal changes was to introduce a “second chance” concept by creating a system that gives a company in distress that demonstrates that it has the potential to overcome such distress a genuine chance to undergo reorganisation, while at the same time safeguarding the fundamental rights of creditors.

Therefore, the new regulations aim to facilitate early restructuring, which allows to preserve the value of a company by providing adequate tools to entities in various legal and factual circumstances. In addition, the long-term goal of the new legal framework is to develop a new restructuring culture that would involve all interested parties, including debtors, creditors, investors and providers of finance. 

Since 2016, the number of restructuring proceedings has steadily increased. This confirms that the changes introduced in 2016 have long been desired by the market.

Pre-packaged Bankruptcy 

As part of the 2016 reforms, pre-packaged bankruptcy sale proceedings (pre-pack) were introduced into the Polish insolvency regime. In the opinion of many market participants, pre-pack constitutes an innovative and much-desired insolvency procedure. As a new institution, its functioning is strictly monitored and is continuously being improved. The latest changes to the provisions governing pre-pack came into force in March 2020.

Under Polish law, the bankruptcy of a company may be conducted pursuant to ordinary bankruptcy proceedings or pre-packaged bankruptcy proceedings. The main difference between these two types of bankruptcy proceedings is the time at which the sale of the debtor’s assets takes place. 

In ordinary bankruptcy proceedings, the court first declares the bankruptcy of a debtor and appoints a bankruptcy receiver that administers the bankruptcy estate, carries out a tender and sells the bankrupt’s assets. As an alternative to standard bankruptcy proceedings, it is possible to file for pre-pack. In this procedure, the court simultaneously declares the bankruptcy of the debtor and approves the sale of the bankrupt’s assets to the investor on terms previously negotiated with the debtor. Therefore, the prospect of preserving the value of the debtor’s assets rises dramatically, which directly correlates to the sale price that can be obtained. In both proceedings, as a rule, the investor acquires the debtor’s assets free and clear of any encumbrances and obligations.

It should also be noted that the objective of all bankruptcy proceedings is to satisfy the claims of creditors to the greatest extent possible. Taking into account this goal, it should be noted that pre-pack brings additional value also to creditors. Within pre-pack proceedings, there is a greater prospect for the debtor’s enterprise to be sold as a going concern and thus to obtain a higher price. As a consequence, creditors may be able to achieve a greater level of satisfaction. Notwithstanding the foregoing, creditors may also be satisfied much faster in such proceedings than in the case of regular bankruptcy proceedings.

Criticisms

Nevertheless, there have been notable criticisms regarding pre-pack. The main objection raised is a lack of sufficient transparency and a competitive sale process, which may lead to the debtor’s assets being sold at a diminished value despite certain safeguards such as the approval of the sale by the court. Therefore, the 2020 amendments to the regulations governing pre-pack were introduced with the aim of ensuring a greater level of transparency and competitiveness in the sale process.

In particular, on the basis of the amended provisions, secured creditors are informed by the court about a submitted pre-pack petition and are given an opportunity to opine on such petition, though any opinions expressed are not binding upon the court. Moreover, the information on filing a pre-pack petition is announced in the official court gazette. Therefore, all market participants, without any limitations, have access to such information. In order to further enhance the competitiveness of the sale process, the court is also currently required to schedule an auction if at least two offers regarding the acquisition of the bankrupt’s assets have been filed.

Simplified Arrangement Approval Proceedings

Other changes to the Polish insolvency regime came into force in June 2020 in reaction to the COVID-19 pandemic. The number of bankruptcy and restructuring proceedings in the first half of 2020 remained at a level similar to that of 2019, which was likely a result of the legal regulations introduced as part of government support programmes. However, a significant systemic increase in the number of bankruptcy and restructuring proceedings connected with the COVID-19 pandemic cannot be excluded in the coming quarters; therefore, the introduction of new simple restructuring proceedings took place.

Simplified arrangement approval proceedings are very innovative under Polish law. They grant protection to the debtor from its creditors without a court ruling – the debtor gains protection simply by way of the publication of an announcement on the opening of simplified arrangement approval proceedings in the official court gazette. Therefore, these proceedings are the only proceedings in the Polish insolvency regime in which the debtor gains protection from its creditors without the involvement of the court.

It is significant that in the simplified arrangement approval proceedings, under certain circumstances, debtors may gain protection from secured creditors. This is not a typical solution, because, as a general rule, the opening of restructuring proceedings does not guarantee protection against secured creditors. However, upon a request of a debtor, any of its creditors or an arrangement supervisor, the court may annul the effects of the opening of the simplified arrangement approval proceedings if they are detrimental to the creditors.

It should also be noted that although such simplified arrangement approval proceedings were introduced into the Polish insolvency regime in reaction to the COVID-19 pandemic, they may be opened regardless of whether the debtor’s deteriorating financial condition results from the effects of the COVID-19 pandemic. Debtors may avail themselves of these proceedings until 30 June 2021; however, it cannot be excluded that simplified arrangement approval proceedings will be permanently introduced into the Polish legal system in the future.

Simplified arrangement approval proceedings are designed as a fast-track procedure in which an arrangement with creditors should be approved within four months. These proceedings are driven by the debtor, under the supervision of the arrangement supervisor, with limited involvement of the courts. Thus far, however, it is difficult to assess the effectiveness thereof. The first simplified arrangement approval proceedings have already been opened, but at the moment, it is difficult to assess whether the adoption of an arrangement by creditors under these proceedings will become common.

Rymarz Zdort

ul. Emilii Plater 53
00-113 Warsaw

+48 22 520 4274

+48 22 520 4001

magdalena.pyzik@rymarz-zdort.com www.rymarz-zdort.com
Author Business Card

Law and Practice

Authors



Rymarz Zdort is seamlessly continuing, under a new brand, the operations and legacy of Weil, Gotshal & Manges – Pawel Rymarz sp.k., the Warsaw branch of a New York-based law firm. The firm, and its 90+ attorneys and advisers, is well known for its involvement in some of the most high-profile and ground-breaking restructurings and transactions. For over 20 years, the firm has advised on the most notable restructurings of companies in Poland, which have involved incredibly complex reorganisations and insolvencies. The firm has extensive experience in handling both domestic and cross-border restructuring and insolvency cases, and its main focus is on significant restructuring matters involving large numbers of creditors and complex debt situations. The firm represents various stakeholders, including debtors, creditors and corporate governing bodies, and also has in-depth experience in representing distressed asset investors in restructuring and insolvency cases, as well as in advising on the purchase of receivables.

Trends and Development

Authors



Rymarz Zdort is seamlessly continuing, under a new brand, the operations and legacy of Weil, Gotshal & Manges – Pawel Rymarz sp.k., the Warsaw branch of a New York-based law firm. The firm, and its 90+ attorneys and advisers, is well known for its involvement in some of the most high-profile and ground-breaking restructurings and transactions. For over 20 years, the firm has advised on the most notable restructurings of companies in Poland, which have involved incredibly complex reorganisations and insolvencies. The firm has extensive experience in handling both domestic and cross-border restructuring and insolvency cases, and it's main focus is on significant restructuring matters involving large numbers of creditors and complex debt situations. The firm represents various stakeholders, including debtors, creditors and corporate governing bodies, and also has in-depth experience in representing distressed asset investors in restructuring and insolvency cases, as well as in advising on the purchase of receivables.

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