Currently, the insolvency procedure in Romania is regulated by Law No 85/2014, also known as the Insolvency Code, which is similar in content to the former Law No 85/2006 (amended substantially in 2014, 2018 and 2022). This law provides classic insolvency, reorganisation and liquidation procedures, as well as two restructuring procedures (which aim to help redress the solvable debtor’s activity) – namely, the procedure of the restructuring agreement (acord de restructurare) and the procedure of arrangement with creditors (concordat preventiv). The latter has kept its name since the 2022 amendments, but it has been modified in substance. The provisions of the special law can be supplemented with the provisions of the Civil Procedure Code and of the Civil Code, to the extent that they do not contravene the latter.

For certain entities, like credit institutions or insurance companies, special procedures apply. These are governed by Law No 312/2015 (regulating the recovery and resolution of credit institutions and investment firms) and Law No 237/2015 as amended by Law No 17/2024 (governing insurance company financial recovery and insolvency, among other things). These laws provide tailored frameworks for addressing financial distress in these sectors, ensuring stability and protecting depositors. Law No 17/2024, for example, regulates a special financial recovery procedure for insurance companies and defines the notion of the “insolvency of the insurance/reinsurance company”. Law No 503/2004 on financial redress, bankruptcy, dissolution and voluntary liquidation in the activity of insurance was repealed as of 19 January 2024.

General Overview

The law provides for two voluntary procedures to redress a debtor’s activity outside the courtroom that transpose Directive (EU) 2019/1023 on restructuring frameworks: the procedure of the restructuring agreement, and the procedure of arrangement with creditors. These procedures are applicable in the case of a debtor in difficulty, including financial difficulty. In the case of a debtor in payment default, the law also provides a judicial procedure.

Voluntary Restructuring Procedures

Restructuring agreement

The procedure of the restructuring agreement is a confidential, partially collective and minimal judicial procedure by which a restructuring administrator assists the debtor or, at the debtor’s request, negotiates with the creditors in order to sort out the state of difficulty in which the company finds itself. Among other advantages and novelties of the restructuring agreement is the fact that the debtor retains its right to manage the business (debtor in possession). The intrusion of the syndic judge is limited to verifying the legality of the restructuring agreement, including the fair treatment of creditors, and that the agreement was approved by the necessary majority (creditors holding at least 30% of the affected receivables). The possibility of cross-class cram-down is provided.

Arrangement with creditors

An arrangement with creditors is an agreement concluded between the company in difficulty and the creditors holding at least 30% of the affected receivables (other specific conditions are applicable), by which a restructuring plan for redress that can modify the creditors’ receivables, is proposed. The procedure is co-ordinated by an administrator (insolvency practitioner), the contribution of the syndic judge being limited to the approval of the redress plan and settling any challenges. The debtor benefits from a temporary stay of individual enforcement actions for a period ranging from three to a maximum of 12 months. The possibility of cross-class cram-down is provided. Debtors that had an arrangement with creditors when the 2022 amendments to the insolvency law entered into force could request an extension of the arrangement, but for no more than 60 months from the date of the syndic’s approval. Creditors who voted against the extension, or those who were not part of the arrangement, could file for the opening of insolvency proceedings against the debtor or seek to recover their claims in any other way provided for by law.

Involuntary – Formal Insolvency Proceedings

The insolvency procedure may consist either of a simplified procedure, in which case the company enters into bankruptcy directly; or a general procedure, in which case the company may enter, after an observation period, into the reorganisation period (if there is a chance of redress and the creditors agree with the proposed measures) and, possibly (in the case of the failure of a reorganisation plan or when such a plan is not proposed or not accepted), into bankruptcy.

Types, Selection/Appointment of Officers

Statutory officers play a crucial role in various legal and statutory regimes, especially in insolvency and restructuring procedures. Their responsibilities, powers and interactions with the debtor and its directors depend on the specific type of statutory officer and the legal framework in place.

All the officers appointed according to Law No 85/2014, namely, the administrator in an arrangement with the creditors, the ad hoc proxy or the insolvency administrator/judicial liquidator, must be insolvency practitioners. The insolvency administrator/judicial liquidator is appointed by the debtor or the creditors and, subsequently, confirmed by the syndic judge. If there are nomination proposals from both the creditors and the debtor, the creditors’ nomination will prevail. The practitioner is appointed from those who have submitted an offer to the case file, depending on the complexity of the procedure, and the expertise and capacity required to manage the procedure.

In a procedure of insolvency of a natural person, the liquidators may be randomly appointed from insolvency practitioners, court enforcement officers, attorneys at law and/or notaries.

Statutory Roles, Rights and Responsibilities of Officers

The insolvency administrator has powers and duties of supervision over the debtor’s current activity, and also monitoring the performance of the reorganisation plan (if approved). Contracts, operations and payments that exceed the business-as-usual rule will be authorised by the judicial administrator after they are approved by the creditors’ committee. If the administration rights have been suspended by the court, the management of the company is conducted by the judicial administrator, who assumes all the powers and duties. Opening the bankruptcy automatically removes the administration right of the debtor and the judicial liquidator takes over the management of the debtor’s business and assets.

The law regulates several hypotheses in which an insolvency practitioner may not fulfil the role of insolvency administrator/judicial liquidator. In particular, these refer to situations in which the practitioner has had relations with the debtor during a period of two years prior to the opening of the insolvency procedure. Also, an insolvency practitioner who is a former judge may not be appointed as administrator/liquidator in the territorial jurisdiction of the court of law in which they performed their activity during the past three years.

Creditors, statutory administrators or managers may not be appointed as insolvency administrators/liquidators of a company.

In order for a person to qualify as an insolvency practitioner, long-term higher-education studies in law or economic sciences need to be completed, and the person must have at least three years’ experience in the legal or economic area. Authorisation to act as an insolvency practitioner is also required.

Other Participants in Insolvency Proceedings

The syndic judge

When a judicial insolvency procedure is opened, the legality of the conduct and of the measures taken by the insolvency practitioner are verified by the syndic judge.

The creditors’ committee

Within the procedure there is a creditors’ meeting, comprising all the creditors that have registered claims against the debtor. The creditors’ meeting votes on the formation of a creditors’ committee consisting of three or five creditors from the first 20 creditors, depending on the value of the receivables. This creditors’ committee has powers and duties of representation of the creditors. The activity of the members of the committee is not remunerated. The member of the creditors’ committee who is in conflict of interest with the joint interest of the creditors participating in the procedure is obliged to abstain from voting under penalty of annulment of the decision of the creditors’ committee.

In voluntary restructuring procedures, no committee or representative of the creditors is appointed, although such an appointment is not forbidden.

General Provisions, Legal Hierarchy of Claims

In preventative procedures, the restructuring agreement and restructuring plan contain the debt payment schedule. In insolvency and bankruptcy proceedings, creditors’ claims are typically ranked based on a priority system, which determines the order in which they are paid. This hierarchy is crucial in deciding how the amounts recovered from the foreclosure of the debtor’s assets will be distributed, thus the law establishes an express satisfaction order from the amounts resulting from liquidation. See details in 2.2 Priority Claims in Restructuring and Insolvency Proceedings.

Secured claims

Secured creditors that have established guarantees over the debtor’s assets have right of preference and of priority to the satisfaction of their receivables from the amounts obtained as a result of the sale of the assets.

At the same time, they may also calculate interest from the date of opening of the procedure, if the value of the asset affected by the guarantee allows it. Another specific right of the secured creditors is the possibility of individual enforcement of the assets covered by their guarantee, in certain conditions provided by the law – especially when an asset is not essential for a reorganisation plan.

Unsecured claims

In contrast to the secured creditors, the unsecured creditors are unable to calculate accessories after the insolvency procedure is opened.

Amounts will be distributed pro rata to the unsecured creditors only after full compensation of the creditors in the superior category according to the order expressly provided by law, namely after the compensation of secured claims, estate claims or claims with other preferential rights, such as budgetary claims.

Subordinated claims

Only after the discharge of these categories of creditors, to the extent that the debtor’s assets permit, will unsecured claims and, subsequently, subordinated claims be covered.

Order of Distribution

In preventative procedures, the restructuring agreement and restructuring plan contain the debt payment schedule. All the affected receivables may suffer haircuts, postponements/rescheduling, etc. In the judicial procedure of insolvency, with reference to the indicated categories, the law establishes the following satisfaction order from the amounts resulting from liquidation:

• duties and any other procedural expenses, including the fee of the insolvency administrator/judicial liquidator;
• receivables derived from financing granted during the procedure (new money);
• receivables derived from financing granted in insolvency prevention procedures (including a practitioner’s fee for such procedures);
• receivables derived from labour relations;
• receivables derived from the continuation of the debtor’s activity;
• budgetary/tax receivables;
• receivables representing the amounts owed by the debtor to third parties as support obligations, child allowances or as periodic payment intended to provide a means of subsistence;
• receivables representing the amounts established by the court for the support of the debtor and their family (if they are a natural person);
• receivables representing bank loans; those resulting from deliveries of goods, performance of services or other works; those resulting from rents, including bonds and receivables representing the difference between the value of the entire receivable and the market value of the recovered assets that are subject to the lease contract, terminated before the opening of the insolvency procedure;
• other unsecured receivables; and
• subordinated receivables.

In insolvency, the expenses and specified duties of the procedure, as well as the financing granted during the procedure (beneficiary of a preferential cause born during the insolvency procedure), have priority over the secured receivables. After these two categories of receivables, the secured creditors are the first to be satisfied from the sale of the assets under their guarantee.

If, from the price obtained from the sale of the asset affected by causes of preference, the receivable of the secured creditor is not covered, then the uncovered difference will be registered in the category of unsecured receivables according to its nature.

The unsecured receivables have a different order of payment depending on their source and, as the case may be, the claim holder, as detailed in 2.4 Unsecured Creditors.

New Money

In reorganisation, new money investments or loans can be secured by assets of the company that are free of any liens and securities, and will benefit from a super-priority.

The Rent Arising From a Lease Agreement

The situation of the creditor in the leasing contract differs based on the ownership of the assets that are the subject of the leasing contract. If the ownership was transferred to the debtor, the creditor benefits from a legal mortgage over those assets (secured). If the assets were recovered by the creditor, their receivables (rent, penalties) will be registered as unsecured.

Liens/Security

Romanian legislation regulates the following types of collateral and privileges:

• immovable mortgages;
• movable mortgages (including on the accounts and receivables or on the movable assets);
• special privileges;
• pledges; and
• retention rights.

Rights and Remedies

Secured creditors benefit from adequate protection in the insolvency procedure, having special prerogatives. As a rule, all judicial and extra-judicial actions, as well as individual enforcement measures, are suspended from the date of the opening of the insolvency procedure.

Nonetheless, as an exception stipulated in favour of the secured creditors, they are permitted to request the lifting of the measure of suspension and the immediate sale of the asset(s) affected by the guarantee.

The amounts obtained from the sale of the asset(s) affected by the guarantee will be distributed with priority to the creditors whose receivables are secured with such assets, with these creditors also being permitted (unlike the other creditors) to calculate and also to charge accessories to the principal, including after the date of opening of the insolvency procedure.

Regardless of whether they are secured or unsecured, the creditors retain the right to pursue the full value of the claims against the debtor’s co-debtors and guarantors, even if they voted to accept the plan.

Pre-Judgment Attachments

Precautionary measures may be considered for determining the secured character of the receivable claimed by the creditor that established such a measure (on condition that certain expressly provided conditions have been met), without yet preventing the possibility of sale of the assets in the liquidation procedure. In principle, the assets sold by the insolvency practitioner in the insolvency procedure are acquired free of encumbrances, except preventative measures ordered in the criminal case file with a view to special confiscation and/or extended confiscation.

As a general rule, from the date of the opening of the insolvency procedure, all judicial or extrajudicial actions or enforcement measures for the realisation of receivables against the debtor’s assets are suspended.

An exception provided by the law refers to the existence of a movable mortgage on a cash collateral account of the debtor in insolvency, in which case the available funds will be released to the creditor based on a simple request made within the observation period.

Rights of Set-Off

The law expressly provides that the opening of the insolvency procedure does not affect the right of any creditor to claim the set-off of its receivable with a debtor against it, when the conditions provided by the law in the matter of legal set-off are met at the procedure opening date.

In respect of the netting agreement, the law does not forbid the conclusion of such an agreement; however, it does require that certain specific conditions must be met.

In Romania, out-of-court restructuring (also known as consensual or informal restructuring) provides an opportunity for debtors and creditors to negotiate a debt resolution without initiating formal insolvency proceedings. This process offers more flexibility than formal procedures, but it still requires a degree of co-ordination among stakeholders.

Consensual and Other Out-of-Court Workouts and Restructurings

As an informal and consensual procedure for the prevention of insolvency, the Insolvency Code provides the procedure of the Restructuring Agreement, which is characterised by confidential and unlimited-in-time negotiations between the debtor and its creditors, assisted by a restructuring administrator. However, the law does not provide specific rules for the conduct of the negotiations, except that the restructuring agreement must respect the fair treatment of the creditors. This is a requirement verified, among other legal elements, by the syndic judge.

Romanian legislation also regulates the arrangement with creditors, which is a less formal negotiation procedure, allowing a temporary stay of individual enforcement actions against the debtor. The provisions of the law regarding the voting and quorum requirements and the fair treatment of creditors are similar to the restructuring agreement procedure.

Nature of Proceedings

There are no prior procedures to be followed before the filing of a claim for the prevention of insolvency, but the main condition to accessing this procedure is that the debtor must be in a state of difficulty, a notion defined by law and which must be certified by the insolvency practitioner.

Neither of the two restructuring procedures are mandatory before commencement of a formal “statutory process”. If a company is in a state of insolvency, its directors must address the tribunal so that, after the opening of the procedure, any negotiation with the creditors can only be made through the reorganisation plan.

The preventative proceedings provide that the creditors should not receive less than they would receive in the next best alternative scenario, which may even mean bankruptcy, based on an evaluation report drawn up by an authorised valuer no more than six months before the date of opening of the procedure.

Relations Between the Parties

Debtors must convince the affected creditors (those whose claims or interests are directly affected by a restructuring plan) about the viability of the restructuring agreement/plan and that this is preferable to entering a statutory insolvency procedure. In so far as this concerns the possibility to impose the plan on dissenting creditors, the cross-class clam-down is implemented for both the vote on the restructuring agreement and the restructuring plan. Basically, the judge can confirm the agreement/approve the plan if not approved by the creditors of each category of receivables with an absolute majority (over 50%), if certain cumulative conditions are fulfilled.

In general, restructuring market participants and professionals place greater trust in the possibility of recovering receivables outside of insolvency procedures, that is, within an informal procedure. Nonetheless, historically speaking, the consensual procedures are very rarely used in practice, individual negotiations being preferred. The restructuring agreement and the arrangement with creditors’ procedures were regulated in 2022, and have since become more popular, although the number of preventative procedures is still low (175 new procedures in 2024, compared to 7,274 insolvency procedures).

The out-of-court restructuring procedures are flexible, negotiation-based and partially collective procedures. The restructuring agreement/plan can be invoked against the dissenting creditor only if certain conditions are met. Creditors who do not participate (non-affected) retain their rights and can pursue their claims independently, which makes the procedure less binding and enforceable compared to formal restructuring procedures under insolvency law.

The law provides for a reorganisation procedure as part of the general insolvency procedure. Thus, before ordering the debtor’s entry into the judicial reorganisation procedure, the opening of insolvency proceedings is required, which implies the fulfilment of the conditions provided by law in this regard. Romanian law sets forth that an insolvent debtor is obliged to file a claim with the tribunal requesting that it be subject to the insolvency procedure within a maximum of 30 days from the occurrence of insolvency. This is defined as the point at which insufficient funds are available for the payment of certain, liquid and payable debts that are more than 60 days overdue. The minimum amount of these debts should be RON50,000. Any creditor holding a receivable higher than RON50,000 against a company, that has not been paid in a term of at least 60 days from its maturity, may also request the opening of an insolvency procedure against the company.

When a debtor is in payment default, it is mandatory that a request to open the insolvency procedure is submitted to the court. The insolvency procedure may consist either of a simplified procedure, in which case, the company enters bankruptcy directly; or a general procedure, in which case, the company may enter into a reorganisation period (after the observation period), if there is any chance of redress and the creditors agree with the proposed measure. To benefit from the right to reorganise, the debtor will have to declare this intention, either in the claim to open the procedure or by a separate declaration (if the procedure was opened at the request of a creditor).

Conditions and Process for a Financial Restructuring/Reorganisation

For an insolvent company to reorganise based on a reorganisation plan, it has to submit the plan within the legal term provided by the law, obtain the creditors’ votes (acceptance) according to the special procedure, and secure confirmation from the syndic judge. The reorganisation plan may be proposed by the debtor, by the insolvency administrator and/or by one or more creditors who together hold at least 20% of the total value of the receivables contained in the final table.

With regard to the reorganisation plan, the law provides a distinct voting modality from the other decisions that the creditors make in the creditors’ meeting. Each receivable benefits from a voting right that its holder exercises within the category of receivables of which such receivable is a part.

The following receivables represent distinct categories:

• the receivables benefiting from preference rights;
• salary receivables;
• budgetary receivables;
• the receivables of indispensable creditors; and
• the other simple contract receivables.

Accepting a Reorganisation Plan

A reorganisation plan will be considered accepted by a category of receivables in the event that the plan is accepted by creditors representing an absolute majority of the value of the receivables from that category. A condition for the acceptance of the plan is that creditors representing at least 30% of the total value of the body of creditors vote for its approval.

The law does not exclude the possibility of the submission of several reorganisation plans, although only one may be accepted by the creditors, and submitted for confirmation with the syndic judge.

Use of a Restructuring Procedure to Reorganise a Corporate Group

A restructuring procedure may not be utilised to reorganise a corporate group on a combined basis for administrative efficiency, but different types of M&A operations can be performed within a reorganisation procedure.

Composition of the Plan

In principle, the reorganisation plan may be proposed after the general insolvency procedure has been opened against the debtor. At the end of the observation period, when the table of creditors has become final (all challenges have been set) any of the persons enumerated may propose a reorganisation plan. The reorganisation plan will impact all claims registered in the definitive table of receivables, whether they are claims of commercial creditors, tax claims, shareholder or group company claims, etc.

From a financial point of view, the reorganisation plan must comprise a projection of cash flow that would allow for the execution of the measures proposed by the plan. In terms of viability, the creditors have the sovereign decision, but if there are doubts, the court may solicit a neutral opinion from an insolvency practitioner on whether it is possible to implement the plan.

In reorganisation, a necessary and imperative condition which must be met is the correct and fair treatment of the receivables, so that the creditors receive at least what they would receive in the case of a bankruptcy.

The main purpose of the reorganisation plan is the company’s recovery, with coverage of as high a percentage of the body of creditors as possible, and the company’s subsequent reinsertion in the economic circuit. This can obviously have numerous benefits, including social benefits, by means of the protection of jobs.

Following the confirmation of a reorganisation plan, the debtor will conduct its activity under the supervision of the insolvency administrator, with the court intervening only to solve certain aspects in which it is vested and which are related to the legality of the measures and of the means of execution of the plan. As mentioned, the reorganisation procedure starts as of the date of confirmation of the plan by the court, as voted by the creditors.

Expedited Procedure

Romanian law does not provide for a distinct expedited procedure, but it does allow that a reorganisation plan may be executed within three years, respectively four years for legal persons, with the possibility of an extension. The maximum interval of a reorganisation plan is five years from the initial confirmation. However, if the debtor’s activity allows it, the plan may last for any period shorter than three, or respectively, four years.

The claims for current receivables are assessed by the insolvency administrator, who formulates a point of view. In the event there are any disputes with regard to the claimed receivable, the interested creditor may address the court of law. The reorganisation plan validly voted for by the creditors in accordance with the majority rule specified above is also mandatory for creditors who have not expressed a point of view.

The reorganisation plan is public, may be analysed by each creditor, is submitted to the case file and to the trade registry and is usually also accessible online. Nonetheless, the plan must not contain detailed remarks regarding the conduct of the economic activity, nor disclose the trade secrets of the company.

The plan may be challenged before the syndic judge. To this end, the creditors can file objections regarding the legality of the reorganisation plan. Regarding objections based on non-legal grounds, the interested party may separately challenge the decision of the creditors approving such plan. In the event that the annulment of the decision of the creditors approving such plan is also requested, any objections regarding the legality of the reorganisation plan must be formulated in the same request.

The plan is voted on by the creditors under the aforementioned conditions, and subsequently confirmed by the court. The receivables will be paid as per the schedule of payments, which is a mandatory annex of any reorganisation plan. At the time of payment of all the receivables listed in the schedule of payments, the reorganisation procedure may be closed and the company may re-enter the economic circuit.

Stay of Enforcements

From the date of opening of the insolvency procedure under the law, all judicial or extrajudicial actions or enforcement measures for the recovery of receivables against the debtor’s estate are suspended. From this point on, the receivables/claims can be requested only within the insolvency procedure. The creditor benefiting from a cause of preference may request the syndic judge to lift the suspension with regard to their claim and to immediately sell the asset to which this preferential cause applies in certain situations listed by law.

If the administration right is not removed, the company can continue to operate its business as usual after the date of opening of the procedure, under the supervision of the insolvency administrator. In cases where the court orders the removal of the administration right, the management of the company passes to the insolvency administrator.

After the procedure opening date, the shareholders of the debtor are summoned to elect a special administrator. This will be the only entity able to manage the company, under the supervision of the insolvency administrator.

In the observation period and during the reorganisation period, the debtor can obtain financing through direct negotiation with a financer and following approval of the loan conditions by its creditors.

During the preventative proceedings, the debtor remains in control of the business, according to the principle “debtor in possession”.

Roles of Creditors

From the moment of drafting the preliminary table, creditors are registered by categories of receivables, namely the receivables benefiting from preference rights, salary receivables, budgetary receivables and simple contract receivables.

All the creditors are invited to convene in a general meeting of creditors. If there are many creditors, a creditors’ committee of three or five members can be elected, chosen in the creditors’ meeting from those who manifest their intention to be part of the committee, and in the order of the receivables, from the largest to the smallest, so that each category of creditor is represented. The expenses are incurred by each creditor, these not being settled by the debtor.

Creditors have access to all the information brought to their attention by the insolvency administrator by means of its activity reports. These activity reports and the quarterly financial statements drafted in the reorganisation procedure are published in the Insolvency Procedure Bulletin. The documents are submitted to the case file and are communicated to the creditors present in court at the hearings. The quarterly financial statements drafted in the reorganisation procedure are presented to the creditors’ committee.

Role of Shareholders

Shareholders, associates or other limited liability members are prohibited from intervening in the management of the activity or in the administration of the debtor’s assets, with the exception of the express and limited cases provided by law and mentioned in the reorganisation plan.

Claims of Dissenting Creditors

The receivables of a particular class of creditors may be modified by means of the reorganisation plan, even if the creditors in question voted against the plan. The only conditions are that all the categories must be treated fairly, and that they should not receive less in the reorganisation procedure than they would have received in the bankruptcy procedure.

Priority New Money

New money investments or loans can be secured by assets of the company that are free of any liens and securities, and can benefit from a super-priority.

Determining the Value of Claims and Creditors

It is not possible to use the statutory process as a forum for determining the value of claims and those creditors with an economic interest in the company.

Third Party/Non-Debtor Releases

Under Romanian law, the concept of third-party/non-debtor release is recognised only in relation to the debtor itself, the members of its economic interest group, and the partners in general partnerships or limited partnerships, and only by means of a reorganisation plan (which will specify the extent to which such persons are discharged from liability).

In the case of limited liability companies, there is no statutory provision regulating a potential release of liability for such persons. Nevertheless, the reorganisation plan may include, as a restructuring measure, that one of these persons should undertake payment of the outstanding claims. Such payment would not, however, exonerate that person from potential liability for the acts committed in relation to the debtor company. In the event that such liability action against the administrators, shareholders or any person guilty for the state of insolvency is admitted, the amounts recovered will be used to pay the receivables according to the payment schedule provided in the plan.

Regarding guarantors, the judicial administrator may enter into settlements and release guarantors from their obligations. However, such settlements require confirmation by the syndic judge, who will review the transaction solely from the perspective of legality, without assessing its opportunity.

Arbitration Instead of Court Proceedings

Statutory restructuring proceedings fall within the exclusive jurisdiction of the competent courts. Therefore, the principal actions and decisions within the restructuring process (eg, the opening of proceedings, confirmation of a restructuring plan and supervision of its implementation) cannot be referred to arbitration.

However, arbitration is not entirely excluded from the restructuring context. Contractual disputes or patrimonial claims that have nothing to do with the restructuring proceedings (eg, claims arising under commercial contracts concluded by the debtor prior to the commencement of restructuring) may still be subject to arbitration.

Completion of the Reorganisation Plan

If the confirmed plan is carried out according to its provisions, the syndic judge will close the procedure and order the return of the debtor to the normal business circuit.

Fairness of the Plan

A restructuring or reorganisation plan or agreement among creditors is subject to an overall “fairness” test for correct and equitable treatment. Even though the creditors accept the plan, the court must confirm it.

Should a reorganisation plan be accepted by the creditors and confirmed by the judge, the debtor’s assets may be sold pursuant to the provisions of the reorganisation plan.

If the reorganisation plan is not approved by the creditors or confirmed by the judge, bankruptcy may be declared.

Failure to Observe the Terms of Agreements

In the event the debtor company fails to fulfil its obligations as per the terms of an agreed reorganisation plan, the bankruptcy procedure will be declared.

The bankruptcy application for non-compliance with the reorganisation plan can be formulated by any of the creditors or by the judicial administrator.

In the event of bankruptcy after confirmation of a reorganisation plan, the holders of receivables will participate in the distributions with the receivables recorded in the final consolidated table. Regarding the guarantees provided for the fulfilment of the obligations assumed by the reorganisation plan, these will remain valid in favour of the creditors for the payment of the amounts due according to the reorganisation plan.

The creditors are not usually directly involved in the performance of a restructuring plan.

The Principle – Debtor in Possession

Among other advantages and novelties of the restructuring agreement is the fact that the debtor retains its right to manage the business (“debtor in possession”). The intrusion of the syndic judge is limited to verifying the legality of the restructuring agreement, including the fair treatment of creditors and its approval of the creditors holding at least 30% of the affected receivables.

In insolvency, if the right to manage is not lifted, the company can continue to operate its business as usual after the date of the opening of the procedure, under the supervision of the insolvency administrator. For operations that exceed the current activity, special approval will have to be obtained from the creditors’ committee. In cases where the court orders the suspension of the management right, the management of the company passes to the judicial administrator.

After the procedure opening date, the shareholders of the debtor are summoned to elect a special administrator. This will be the only person/entity able to manage the company, under the supervision of the insolvency administrator.

Obtaining New Financing

In the observation period and during the reorganisation period, the debtor can obtain financing from new or existing creditors, through direct negotiation with the financer and following the approval of the loan conditions by its creditors.

The ad hoc proxy is appointed to identify solutions for reaching an understanding with the creditors. The administrator, in an arrangement with the creditors, prepares the creditors’ table and, together with the debtor, puts together a plan which will make it possible to reconstruct the debtor’s business. The insolvency administrator drafts the creditors’ table, supervises the insolvency procedure and drafts the monthly activity reports in which it presents the debtor’s activity or, as the case may be, directly manages the debtor when the debtor’s administration right has been removed. The insolvency administrator may propose a reorganisation plan, may unilaterally terminate the ongoing agreements, and/or may appoint specialists in the procedure.

Position of Shareholders

In insolvency, the shareholders are represented by the special administrator, whom they must appoint when the judicial administrator summons the shareholders’ general assembly. After the opening of the procedure and the appointment of the special administrator, the general assembly of shareholders/associates suspends its activity and will only meet if summoned by the judicial administrator. Shareholders/associates who are also creditors have a disadvantaged status both in terms of voting on the plan and the order of compensation. If the debtor intends to propose a reorganisation plan, they must obtain the consent of the general assembly of shareholders/associates. Since the shareholders cannot intervene in the development of the reorganisation plan, they have no means to block or disrupt the procedure.

Secured Creditor Liens and Security Arrangements

No changes to the liens and security arrangements of a secured creditor can be made unless the creditor approves them or unless the contractual conditions for releasing such securities are met.

Trading of Claims Against a Company

Claims may be traded without any approval from other parties except those involved in the assignment of the receivable. The transfer will be effective and recognised once it is notified to the debtor and to the judicial administrator.

However, for trading the budgetary receivables, certain conditions and requirements are applicable.

Existing Equity Owners

Existing equity owners cannot receive or retain any ownership or other property on account of their ownership interests, unless all the other debts are paid.

In accordance with the Romanian Insolvency Law a company can enter a bankruptcy procedure directly through a simplified procedure, or by going through the general procedure and not proposing a reorganisation plan, or by failing to obtain the approval of the reorganisation plan by the creditors, or by failing to comply with the provisions of the approved plan. To initiate the procedure, the debtor must be in a state of insolvency characterised by a lack of funds to pay certain, liquid and due debts higher than RON50,000 for more than 60 days from the due date. In the case of a professional who applies for a simplified bankruptcy procedure, one of the following conditions must also be met:

• absence of any assets; or
• the accounting documents cannot be found; or
• the company no longer has management bodies, or they no longer function; or
• the registered office no longer exists or no longer corresponds with the address mentioned in the public registries; or
• the debtor has previously been voluntarily, judicially or ex lege dissolved; or
• the debtor expressly manifests its intention to go directly to bankruptcy.

The procedure is opened by the syndic judge based on a request submitted to the court by the debtor, by one or more creditors, or by the entities/institutions expressly provided by law (eg, a financial supervision authority in the case of insurance companies). The law obliges the debtor to file the insolvency request within 30 days from the occurrence of insolvency. If delayed, the company management (statutory bodies) may face patrimonial liability actions and also criminal charges. If a general procedure has been opened, the transition to bankruptcy is also ordered by the syndic judge ex officio, if they find the legal conditions have been met, or at the request of the judicial administrator.

The bankruptcy procedure, both simplified and general, applies primarily to professionals and only under certain conditions to liberal professions and only concerning their enterprise. The simplified procedure in accordance with Law No 85/2014 also applies to any person with professional activity that has not obtained the authorisation required by law for the operation of an enterprise and is not duly registered. While the liquidation of assets is a procedure also found in the insolvency of a natural person (governed by Law No 151/2015), which leads to the release of residual debts, it distinguishes itself from the insolvency of professionals, as it does not lead to the disappearance of the legal subject.

The two main effects of entering bankruptcy are the dissolution of the debtor and the removal of the debtor’s right of administration. The debtor will only be able to carry out the activities necessary for the liquidation procedure. After removal, the mandate of administrators/directors is reduced to representing the interests of shareholders/associates. The creditors’ receivables that were subject to haircuts through the reorganisation plan are reinstated to their previous value, and the creditors will not be required to return the amounts collected in reorganisation. All receivables become due on the opening date of the bankruptcy procedure. The guarantees established for the performance of the reorganisation plan (eg, for new money) are maintained, but all the contracts/operations that were not provided in the reorganisation plan are presumed to be fraudulent.

Responsibilities of the Liquidator

The liquidator is the main body of the bankruptcy procedure, and is responsible for the following:

• managing the activity of the debtor in bankruptcy;
• analysing the claims and publishing the tables of receivables;
• carrying out the inventory and taking conservation measures for the assets;
• introducing actions for the annulment of fraudulent acts and operations;
• following the collection of debts;
• conducting the sale of assets; and
• drafting the distribution report.

Responsibilities of the Special Administrator

The special administrator, who represents the interests of the shareholders, has limited powers in bankruptcy and participates in the inventory, receives the final report and the last financial statement, and takes part in settlement of the objections and approval of the final report.

Responsibilities of the Syndic Judge

The syndic judge is tasked with: opening the simplified bankruptcy procedure, approving/rejecting the bankruptcy request as a consequence of non-performance of the plan or failure to pay current debts, and handling the contentious matters arising from the liquidation (objections/challenges related to the sale of assets and the distribution of amounts). The syndic judge is also responsible for discharging the liquidator, closing the procedure and ordering the de-registration of the debtor from the Trade Register.

Responsibilities of the Creditors

Creditors convened in the creditors’ assembly decide on all the opportunity aspects of the liquidation. They establish the type of sale and approve the sale regulations and even the value for which the assets will be sold. The main purpose of the liquidation is to satisfy the largest proportion of receivables possible, so the main interest pursued in this phase is that of the creditors.

Status of Contracts/Agreements

As a rule, all contracts/agreements by which the debtor carries out their business (both pre-insolvency and concluded in the observation/reorganisation period) cease on the date the bankruptcy procedure is opened. As an exception, some contracts may be maintained for a limited time during the bankruptcy period, to protect the assets and maximise the amount collected (eg, utilities, accounting services and security services). The law also authorises the liquidator to denounce any contracts concluded by the debtor, and assigns ongoing contracts to third parties, provided that those contracts were not concluded intuitu personae, with the same goal of maximising the debtor’s estate.

Arbitration Instead of Court Proceedings

As a general principle, statutory insolvency proceedings fall within the exclusive jurisdiction of the competent courts and cannot be submitted to arbitration. This exclusivity is justified by the nature of insolvency, which involves the collective interest of creditors and the supervision of the court-appointed judicial administrator or liquidator. Matters such as the opening of insolvency proceedings, the verification and registration of claims, the approval of reorganisation plans, or the distribution of proceeds are therefore incompatible with arbitration procedure.

However, this does not mean that arbitration is entirely excluded. Disputes of a contractual or patrimonial nature that are not connected to the insolvency (eg, disputes arising under commercial contracts concluded by the debtor prior to the commencement of insolvency) may still be referred to arbitration.

The bankruptcy procedure will close after all the amounts collected have been distributed to the creditors, the unclaimed funds have been deposited with the bank, and the syndic judge has approved the final report. At any stage of the procedure, if there are no assets, or these are insufficient to cover the administrative expenses and no creditor is willing to advance funds, the syndic judge can close the procedure. By closing the procedure, the syndic judge deregisters the debtor from the Trade Register and relieves the liquidator of any duties and responsibilities.

If during the liquidation procedure, the amounts collected and distributed cover all receivables, the syndic judge can close the procedure even before all the assets have been capitalised, in which case, the remaining assets will be divided among the shareholders. Also, in the situation described above (all receivables covered), if other assets are identified after the procedure has been closed, they will automatically become the property of the shareholders. On the other hand, if the assets were not sufficient to cover all the receivables and other assets are discovered, case law allows that the procedure can be reopened.

When no receivable claims have been filed against the debtor’s estate after the opening of the bankruptcy procedure, the syndic judge will close the procedure without deregistering the debtor from the Trade Register.

Priority Right

In general, precautionary measures established on the debtor’s assets do not offer the creditor a priority right of collection in insolvency. Some measures may be considered for determining such preferred (secured) character of the receivable claimed, but only if certain conditions are met, without preventing the possibility of sale of the assets in the liquidation procedure. In principle, the assets sold by the insolvency practitioner in the insolvency procedure are acquired free of encumbrances, except preventative measures ordered in a criminal case with a view to special confiscation and/or extended confiscation.

Set-Off Right and Retention of Title

The right of the creditor to set-off their claim, if the conditions provided by law are met, can also be exercised for the mutual claims born after the date of opening of the insolvency procedure, meaning this is also possible in liquidation.

If the seller has retained the title until the debtor pays the price in full, the law provides the sale will be deemed performed by the seller. The assets for which the title was retained will become the property of the debtor, and the creditor will benefit (if the public record registration has been carried out) from a preferential cause (legal mortgage).

Right to Delay or Block Liquidation

As the creditors have the decision of opportunity, they can delay the liquidation process by challenging the measures of the liquidator, by refusing to participate in creditors’ meetings, etc, but they cannot block it. In most cases, the delay will not benefit them, as it is likely to reduce the degree of recovery. The law also provides remedies for the liquidator in such situations, for example, the possibility to request that the sale be made by public auction in accordance with the civil procedure code (and not the Insolvency Law), if the assets have not been sold within a reasonable interval.

Third-Party/Non-Debtor Releases

In bankruptcy proceedings, there is no legal provision allowing for the release of liability of the debtor’s shareholders, the debtor itself, or members of an economic interest group. By contrast, the Insolvency Law permits the judicial liquidator to conclude settlements with guarantors whereby they may be released from their obligations, subject to confirmation by the syndic judge.

Actions and Enforcement Measures

As a general rule, from the date of the opening of the insolvency procedure (general or simplified), all judicial or extrajudicial actions or enforcement measures for the realisation of receivables against the debtor’s assets are suspended. When the decision to open the procedure becomes final, all judicial/extrajudicial actions and all enforcements cease. In order to pursue any receivable right against the debtor, whether guaranteed or unguaranteed, the creditor is obliged to register a statement of claim in the insolvency procedure. An exception provided by law refers to the existence of a movable mortgage on a cash collateral account of the debtor in insolvency, in which case, the available funds will be released to the creditor based on a simple request made within the observation period. At the same time, during the insolvency procedure, the secured creditor can request the syndic judge to lift the suspension in what concerns the creditor’s receivable and the immediate sale of the asset, if certain conditions are met (related to the value of the asset or lack of sufficient protection of the asset).

Depending on the date of opening of the procedure, in principle, the provisions of EC Regulation 1346/2000 or of Regulation 848/2015 on insolvency procedures are applicable.

Foreign proceedings are recognised in Romania as:

• foreign main proceedings, if they are conducted in a foreign member state in which the debtor has established the centre of its main interests (COMI);
• secondary foreign proceedings, if they are conducted in a foreign member state where the debtor has an establishment, ie, any place of business where the debtor carries on an economic activity or an independent profession with human and material resources, and on a non-transitory basis.

Subsequent to the recognition of a foreign main proceedings, the opening of the proceedings provided for by Romanian law against the same debtor may be carried out under the conditions provided for by Romanian law, but only to the extent that the debtor has an establishment in Romania. The effects of the proceedings provided for by Romanian law are limited to the assets situated in the territory of the Romanian State and, to the extent necessary for the application of co-operation and co-ordination, to other assets of the debtor which, according to Romanian law, must be administered in these proceedings.

As a general rule, foreign judgments are recognised in Romania based on a prior judicial control procedure. Several conditions need to be met, namely:

• the foreign judgment needs to be final according to the law of the state where it was pronounced;
• the judgment was delivered by the court of competent jurisdiction;
• there is reciprocity with respect to the effects of foreign judgments between Romania and the state where the court delivered the judgment; and
• if the judgment was delivered without the losing party being present, the party must have had the opportunity to defend itself by being legally summoned by a petition filed in court for the final hearing, and the party must have had the opportunity to file an appeal.

Romanian law also states the grounds for non-recognition:

• the judgment is obviously against Romanian private international law public order;
• the judgment was delivered in an area of law in which the parties cannot freely dispose of their rights, with the exclusive purpose of evading the applicable law according to Romanian private international law;
• the dispute between the same parties was already solved by a judgment (even if not final) delivered by a Romanian court, or it is pending before the Romanian courts;
• the judgment cannot be reconciled with a prior judgment delivered abroad, which is recognised in Romania;
• the Romanian courts had exclusive jurisdiction; or
• the judgment can be appealed in the state where it was delivered.

Once a foreign judgment is recognised based on the above-mentioned conditions, the judgment can be enforced. However, the judgment needs to be enforceable in accordance with the law of the state where it was delivered.

For the recognition and enforcement of judgments in civil and commercial matters within the EU, the Regulation (EU) No 1215/2012 is applicable, meaning that a judgment given in any other EU country is recognised in Romania without the need for any special procedure.

All reciprocity agreements concluded between Romania and other states also apply to insolvency procedures. Internal legislation includes regulations regarding cross-border insolvency.

There is no different treatment for foreign creditors in insolvency procedures, or prevention of insolvency procedures, that are opened within the territory of Romania.

The duties/obligations of the directors of a company derive from the Romanian Companies’ Law (Law No 31/1990) on the articles of incorporation, and from the mandate granted by the company.

Even before the state of difficulty is apparent, the law stipulates that administrators/directors must take into account at least three aspects:

• the interests of creditors, title-holders and other interested persons;
• the need to take reasonable and appropriate measures to avoid insolvency and to minimise the losses suffered by the aforementioned, to which the employees are added; and
• the need to avoid any conduct that threatens the viability of the enterprise (Article 73 Law No 31/1990).

Regarding the state of difficulty, the law does not provide a specific moment when measures (eg, applying for a preventative procedure) must be taken. On the other hand, the law stipulates that within a maximum of 30 days of becoming aware of the state of insolvency, a company is obliged to submit (through its representatives) a request to the court to be subject to the provisions of Law No 85/2014.

After opening the insolvency procedure, a special administrator is appointed. Starting from this moment, the mandate of the statutory directors/administrator ends.

Common law regarding companies (Law No 31/1990) provides the liability of administrators towards the company in certain situations. Separately, Law No 85/2014 regulates a particular liability on the part of members of the management bodies for the debtor’s insolvency, as well as for shareholders, if responsible. The first report prepared by the insolvency administrator/judicial liquidator describes the state of the company and the causes that have generated the insolvency, pointing out the persons responsible (if they can be identified).

The managers/director of the company do not have a direct relationship with the creditors, but with the debtor. The managers are held liable for the activities carried out before the insolvency procedure was opened and are responsible to all the creditors for the state of insolvency. The liability is essentially a joint one, but directors may prove the contrary, for example, by arguing that they opposed certain measures or that they were not part of the management body when the measures were taken.

The law specifically provides the cases that entail the possible personal responsibility of these persons. Among these are: fictitious accounting, using the assets of the debtor for their own or a third party’s benefit; diverting or hiding parts of the debtor’s assets or fictitiously increasing its debts; paying or arranging preferential payments to a creditor, to the detriment of other creditors; etc.

Liability can be found for part of, or for the entire debt, registered in the final table of creditors.

The action can be brought by the judicial administrator/liquidator, the president of the creditors’ committee, or by a creditor holding 30% of the total registered debt.

Under the same conditions as those mentioned above, the Insolvency Law allows for any members of the supervisory board within the company, as well as any other persons who contributed to the state of insolvency of the debtor, to be held liable.

Directors and officers may be subject to other sanctions under applicable criminal or civil law. A person found liable for the state of insolvency of a debtor will have an interdiction on exercising the function of administrator for a period of ten years.

In order to annul/set aside a transfer or transaction concluded by the debtor in the suspicious period, a distinct annulment claim must be submitted to the syndic judge. The acts of incorporation or transfer of a patrimonial nature made by the debtor that go beyond the normal performance of their current activity, may also be targeted by such an action. The Insolvency Law provides for objective annulment cases (in consideration of the act/operation in question), as well as annulment cases concerning the persons with whom they were concluded (persons in a special relationship with the debtor).

The general term of the look-back (suspicious period) is two years, but there are also special terms of six months.

Claims for annulment of fraudulent transactions or transfers concluded by the debtor during the suspicious period, to the detriment of creditors’ rights, may be filed by the insolvency administrator, the creditors’ committee or by a creditor representing more than 50% of the total receivables registered in the final table. The law provides for the possibility of filing such actions only in insolvency and not in restructuring procedures.

The admission of such claim will have the effect of restoring the parties to their previous situation with a few distinctions, whether the transfer was onerous or free, and the consequences for the third party, depending on good or bad faith at the conclusion of the fraudulent deed.