New legislative act regarding insolvency

Having in view that Law No 85 / 2006, regarding insolvency, as amended and supplemented (hereinafter referred to as “Law 85”), was designed pro debtor and construed by debtors as a procedure to minimise the capitalisation degree of assets and the recovery of debts by creditors;
Having regard to the extended duration of insolvency proceedings and the lack of access to funding during such proceedings;

Having regard to the need to transpose Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit institutions, into the national legislation, as well as to facilitate the direct application of Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings,

The Executive has adopted Emergency Ordinance No 91 / 2 October 2013 on insolvency proceedings and prevention of insolvency (hereinafter the “Ordinance”), which has been published in Monitorul Oficial al Romaniei, Part I, No 620 / 4 October 2013.

The Ordinance sets out the rules for insolvency proceedings and prevention of insolvency, applicable as of 25 October 2013.

The Ordinance provisions shall also apply to the proceedings under way at the date on which they become effective, with certain exceptions.

Compared to Law 85, the Ordinance stipulates that régies autonomes (i.e. public corporations) also fall within its scope.

The major new provisions of the Ordinance refer to:

introduction of the notion of “ad-hoc mandate” under which the debtor requests that the court should designate an ad-hoc proxy from among insolvency practitioners, with a view to reaching an agreement with creditors within a 90-day time interval;
regulation of preventive composition as a solution of preventing insolvency proceedings, according to which the debtor may request the commencement of such procedure in order to prepare and obtain approval of the draft composition and business recovery plan;
establishment of the minimum debt threshold at RON 40,000 (as to RON 45,000 provided under Law 85), which should be observed by both debtor and creditor when requesting the opening of insolvency proceedings;
assumption of the state of insolvency when the debtor fails to pay certain, liquid, due and payable debts within a 60-day term of the maturity date (under Law 85 such term covered 90 days);
debtor’s interdiction to appoint an administrator if such debtor files the petition for the opening of insolvency proceedings; in such case it is only the official receiver that may designate an administrator;
provisional suspension of enforcement proceedings under official receiver’s decision;
debtor’s obligation, when filing the petition for insolvency, to provide a list of all its creditors, irrespective of the type of debt;
official receiver’s instruction, following debtor’s request, to the creditor filing the petition for insolvency for making a deposit with a bank, as security, amounting to 10% of the value of such creditor’s receivables, which should not be in excess of RON 40,000;
treatment of the debts arising out of a finance lease;
possibility for the administrator / liquidator to annul fraudulent acts;
possibility for the administrator / liquidator to cancel the employment contracts of debtor’s personnel under specific conditions;
establishment of a one-year term for the implementation of the reorganisation plan, after being confirmed by the official receiver, and the possibility for such term to be extended by another one (1) year at the most;
introduction of an additional criterion for the approval of the reorganisation plan, i.e. the positive vote of creditors holding 50% of the total debt amount;
new provisions regarding the group of companies;
introduction of provisions concerning the bankruptcy of credit institutions;
new provisions regarding the bankruptcy of insurance and reinsurance companies;
new provisions referring to cross-border insolvency.