Due to the SARS-CoV-2 pandemic, the activities of many enterprises remain closed or significantly
limited. Although the government partially opens certain areas of the economy, the economic activity
remains reduced.
In the light of the government’s decision to open shopping malls from May 4, 2020, many retail chains
and smaller stores are deciding to close some of their premises. This decision is mainly due to the need
to pay the full rent in the amount, as it was before the pandemic, but it is obvious that traffic and the
assumed turnover will be incomparably lower.
These restrictions have a negative impact on the entire economy. In certain cases individual enterprises
may require protective measures. When the first signs of losing financial liquidity appear, legal
regulations may be reached to help saving the company and protecting its assets. The choice of acts to
undertake depends on the current financial situation of the company. It’s worth reacting quickly. If the
event, the company is not insolvent yet, but there is or may be signs of insolvency in the near future, it is
advisable to take appropriate legal action – opening the restructuring procedure. Such a situation may
take place, e.g. in the necessity of paying the full rent, knowing that the turnover will be many times
lower than previously expected.
Pursuant to the provisions of the Act of 15 May 2015 – Restructuring Law (“Restructuring Law”),
restructuring proceedings may be conducted towards a debtor who risks the insolvency or an insolvent
debtor. A debtor who risks insolvency means a debtor whose economic situation indicates that he may
soon become insolvent. Especially in the current situation, the above may apply to entities that have
ceased or significantly reduced their activities.
The restructuring procedure is undertaken to avoid bankruptcy. The debtor has a possibility to
restructure its business by an arrangement with creditors, and in the case of remedy proceeding – also by
carrying out remedy measures. Undertaking the restructuring proceedings can save entities who risk
insolvency, providing protection against enforcement proceedings and maintaining contracts and
business, giving the company a chance to survive. It is however crucial to take action quickly.
Anticipating insolvency, the application for debt restructuring shall be filed as soon as possible. Such an
application starts the restructuring procedure. Then, using the protective mechanisms, the company may
focus on rebuilding its business. Such actions can effectively overcome difficulties.
The Restructuring Law provides for the following restructuring procedures: arrangement approval
procedure, accelerated arrangement procedure, arrangement procedure, recovery procedure. Each of
these restructuring procedures is aimed at concluding an arrangement with creditors. The form of
restructuring results from the current situation of the debtor and its needs. The decision as to the form of
the procedure requires a detailed case study.
When submitting an application for the given debt restructuring procedure, it is necessary to submit a
restructuring plan (or initial restructuring plan). Then, an agreement with the creditors regarding the
proposed and planned concessions shall be undertaken. Requirements of the restructuring plan and the
further procedure, including costs, duration, participation of the court supervisor, administrator, judge in
charge of the proceedings or creditors, scope of protection, will depend of the form of the restructuring.
Under the restructuring plan, there is a wide range of options to offer to creditors. Of course, it all
depends on the particular company. Proposals and opportunities should be adapted. The most important
element will usually be debt restructuring, which may involve spreading the repayments of liabilities,
reducing them or setting a grace period. An important element may be the possibility of obtaining
judicial protection against enforcement proceedings. The stronger protection shall be provided through
the recovery proceeding. This proceeding permits to withdraw from unfavorable mutual agreements or
may have impact on employment relations in the company.
The procedures of the Restructuring Law may also apply to entities that have already become insolvent,
according to the provisions of the Bankruptcy Law. It should be emphasized that conducting the
restructuring procedure in relation to such entities is independent of the obligation to file for bankruptcy.
However, given the interest of the debtors, the provisions give priority to the restructuring procedure. In
case, a bankruptcy petition and a restructuring petition are filed, the restructuring petition is recognized
first. Moreover the bankruptcy cannot be declared within the period from the opening of the
restructuring procedure to its termination or cancellation.
Everyone feels the impact of restrictions on the functioning of the economy. The situation is dynamic. If
it turns out that there is a risk that the company will become insolvent, it is necessary to take appropriate
action as soon as possible to protect it – an application for debt restructuring should be filed to open the
restructuring proceeding.
Choosing the right restructuring procedure, results from the situation of the company and its needs.
Further actions – preparation of the restructuring plan, choosing the right restructuring procedure will
certainly require legal advice. Having many years of experience in the field of restructuring and
bankruptcy proceedings, we remain at your disposal in case of any further questions or doubts.
FOR FURTHER INFORMATION PLEASE CONTACT:
Konrad Marciniuk PhD DSc
Principal, Legal Advisor
T: +48 22 447 43 00
M: +48 601 674 424
E: marciniuk@millercanfield.com
Karolina Niemirska-Fido
Legal advisor
T: +48 22 447 43 00
M: +48 607 772 370
E: niemirska@millercanfield.com
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Disclaimer: This publication has been prepared for clients and professional associates of Miller Canfield, and is based on
the facts and guidance available at the time of its release which may be subject to change. The purpose of the publication is
to draw attention to the legal events indicated in it and should not be the sole basis for any decision regarding a particular
course of action; nor should it be relied on as legal advice or regarded as a substitute for detailed advice in individual cases.
The services of a competent professional adviser should be obtained in each instance so that the applicability of the relevant
legislation or other legal development to the particular facts can be verified.