The Romanian legal framework on insolvency procedure has been consistently improved following the enactment of Insolvency Law no. 85, which entered into force on 21 July 2006. Insolvency and bankruptcy are two different concepts in Romanian legislation.
As to Law 85, there are two different procedures with respect to a company which finds itself in financial difficulty: the procedure with creditors and the insolvency procedure. We find special regulations to be followed when dealing with financial institutions and banks.
The creditors’ procedure is a not mandatory, pre-insolvency procedure, which may be initiated only at the debtor’s request. The purpose of such procedure is to provide the company which is in financial difficulty (but not insolvent) with the protection necessary with a view to maintaining its employees and to pay its outstanding debts. During the composition with creditors’ procedure, no insolvency claims may be filed against the debtor.
The Insolvency Law regulates both (i) an ordinary insolvency procedure, and (ii) a simplified insolvency procedure. In order to facilitate the dissolution of certain legal entities, if insolvent, the Insolvency Law provides for a simplified procedure. Such procedure allows certain debtors to go bankrupt simultaneously with the opening of the insolvency procedure. Such is applicable only to the insolvent debtors listed hereunder:
- companies which failed to provide in due time: (i) the complete list of their assets, including bank accounts; (ii) a list comprising details from public registers regarding secured assets; (iii) the list of creditors comprising the due amount and the preferred claims; and (iv) the list of current activities to continue during the surveillance period;
- family associations;
- individual merchants;
- companies, provided that: (i) their estate includes no assets; (ii) their constitutive or financial documents are missing, or the director cannot be found; and (iii) their headquarters no longer exist, or do not correspond to the address registered with the Trade Registry;
- companies demanding to be subjected directly to the bankruptcy procedure or debtors not entitled to a judicial reorganization procedure; and
- companies liquidated prior to application of the insolvency procedure;
The ordinary procedure comprises the judicial reorganization phase, and, where such is not successful, the bankruptcy phase.
The judicial reorganization applies to a debtor for the purpose of ensuring the payment of its debts, according to a reorganization plan. The reorganization plan may individually or separately refer to: (i) the operational and/or financial restructuring of the debtor; (ii) the corporate restructuring by way of changing the share capital structure of the debtor; or (iii) the decrease of the activity of the debtor by liquidation of assets included in the debtor’s estate.
In case of non-compliance with the reorganization plan, the judicial administrator, the creditors’ committee, a creditor, or the special administrator appointed within the reorganization procedure, may apply with the syndic judge for the opening of the bankruptcy procedure.
If you suspect that insolvency may be a concern for you, it is critical that you seek expert insolvency advice immediately. Our Romanian lawyers offer expert advice and services in relation to liquidation matters, insolvency, bankruptcy and the alternatives to bankruptcy.
If you are seeking a bankruptcy attorney who you can speak to about your plans for starting bankruptcy proceedings, you can do the first step into finding the proper one with the free consultation service.