As of July 1, 2023, the Covid regulations protecting debtors against the consequences of failing to file a bankruptcy petition on time will cease to apply.
COVID Shield 2.0, which entered into force on April 18, 2020, introduced regulations under which the 30-day deadline for filing a bankruptcy petition was interrupted or frozen for the duration of the state of epidemic threat. Throughout the duration of COVID Shield 2.0, debtors were covered by "COVID" protection, which will cease to apply on July 1, 2023.
What does this mean?
The debtor will once again have 30 days from the date of insolvency to file a bankruptcy petition. If insolvency occurs just before Shield 2.0 comes into effect, the 30-day deadline will recommence from July 1, 2023.
The COVID-19 shield also introduced a presumption that if a business became bankrupt during a state of epidemic threat or a state of epidemic declared due to COVID-19, the pandemic was the cause of their financial difficulties. The presumption that the pandemic was the cause of the debtor's insolvency also ceases to apply.
What are the consequences of failing to file a bankruptcy petition on time?
The consequences are particularly severe for business managers.
- In the case of a natural person who runs a sole proprietorship, failure to file a bankruptcy petition on time may even result in a refusal to discharge the debt, as we wrote here .
Persons who serve on the management board of a limited liability company:
- they are liable for damages towards creditors, the scope of which also covers their personal property, and the limit of liability is the amount of the creditors’ liabilities unsatisfied by the company;
- are criminally liable and may be punished with a fine, restriction of liberty or imprisonment for up to one year;
- may be deprived of the right to conduct business activity for a period of 1 to 10 years, the right to serve on the management board of a limited liability company, as well as to serve as a succession manager, a member of the supervisory board, a member of the audit committee, a representative or proxy of a natural person conducting business activity in the scope of this activity, a commercial company, a state-owned enterprise, a cooperative, a foundation or an association; as we wrote here .
- are liable with all their assets for the tax liabilities of the limited liability company and for social security contributions if enforcement against the company's assets proves ineffective in whole or in part.
The range of sanctions that may be imposed on persons managing a limited liability company in the event of failure to meet the deadline for filing a bankruptcy petition is wide and severe, so it is worth analysing the financial situation of your business now to protect yourself against the negative consequences of a late bankruptcy petition.
If you hold a managerial position in a company and need an analysis of the legal and financial situation of the enterprise, or are considering restructuring or bankruptcy of the company, please contact us.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of June 28, 2023
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