In today's Compliance article, we continue our discussion of the Arrangement Approval Proceedings. We'll present key issues related to these proceedings: the importance of a restructuring advisor in the proceedings, the costs of the proceedings, the arrangement date and arrangement proposals, and the division of creditors into arrangement groups.
First of all, in order to show you the entire procedure that we will be describing to you in the coming weeks as part of our series, we present a short outline of the procedure for approving the arrangement:
- Conclusion of an agreement with the arrangement supervisor by the debtor
- Determining the settlement date
- Preparation of a list of receivables and a restructuring plan
- Collecting votes by the debtor
- Submitting an application for approval of the arrangement
- Court approval of the arrangement
Costs of proceedings
The costs will be significantly lower than in other restructuring proceedings.
The costs are:
- court fee for the application for approval of the arrangement – PLN 1,000.00
- remuneration of a restructuring advisor.
It is worth noting that there are statutory limits on the maximum remuneration of restructuring advisors, especially in relation to micro and small entrepreneurs and in the event that the court refuses to approve the arrangement or the proceedings are discontinued.
The role of a restructuring advisor in the arrangement approval proceedings
In fact, the first step that should be taken when initiating arrangement approval proceedings is to find a restructuring advisor, with whom an agreement will be signed to supervise the entire process. It is important that the restructuring advisor has experience in supervising simplified restructurings, which ensures the preparation of accurate arrangement proposals. After signing the agreement with the restructuring advisor, the next step is for the debtor, with the assistance of the supervisor, to prepare the following documents: a list of receivables, a list of disputed receivables, and arrangement proposals. The debtor can choose from two variants of the arrangement approval proceedings: one involves an announcement of the arrangement date, which grants the debtor a number of rights; the other proceeds without an announcement but also without protection from enforcement – in return, there are no restrictions on the debtor's asset management.
Arrangement day
The arrangement date serves as a benchmark for determining the circle of creditors. Primarily, it determines which creditors are entitled to vote on the arrangement and whose creditors are considered for the effects of the arrangement at the stage of court approval. Therefore, determining the arrangement date is one of the most important decisions in these proceedings.
The arrangement date is specified according to the principles set out in the Restructuring Law, i.e., the period within which this date may fall. Exceeding this limit is unacceptable, and if it were to occur, the arrangement will simply not be accepted.
The arrangement date can fall no later than three months and no later than one day before the filing of an application for arrangement approval with the restructuring court. This deadline seems sufficient to allow all creditors to comment on the submitted arrangement proposals, even in the most complex proceedings.
Arrangement proposals
The most important element in the success of arrangement approval proceedings is the debtor's preparation of appropriate and legally compliant arrangement proposals. It is crucial that any restructuring method that does not conflict with applicable regulations can be proposed by the debtor to its creditors. The content of the proposal itself must be closely tailored to the debtor's specific situation.
It is therefore impossible to identify universal solutions that will always be a good idea for restructuring liabilities within the framework of arrangement approval proceedings. Therefore, as mentioned at the beginning of this article, it is worth seeking the assistance of an experienced restructuring advisor who will be able to advise the debtor on how to present proposals that will be favorably received by creditors and accepted by the court.
Division of creditors into groups
Restructuring law does not generally limit the possibility of dividing creditors into groups. Therefore, this is a discretionary decision of the person submitting the arrangement proposal, which in the vast majority of cases is the debtor. However, while the division of creditors into groups can always occur if the person submitting the arrangement proposal deems it justified, the only exception to this rule is when secured creditors are involved in the proceedings. In such a case, the division must be carried out according to the rules specified by the legislature. Creditors must be assigned to individual groups based on their interests.
At the same time, the legislator indicates examples of categories in relation to which the division discussed here is possible, for example receivables from employment relationships (provided that employees have consented to being included in the restructuring proceedings), farmers who are entitled to receivables from contracts for the supply of products from their own farm, and creditors who have material security for their rights.
Above all, it is important to remember that no restructuring method, including dividing creditors into groups, can lead to detrimental effects on creditors. Therefore, it is essential to maintain appropriate proportions between proposals submitted to individual creditor groups. At the same time, within each group, creditors remain equal, preventing further differentiation between their situations. A clear benefit of dividing creditors into groups is the increased chances of accepting an arrangement. Therefore, the method of division itself must be strictly embedded in the restructuring criteria, based on identifying specific types of relationships between the debtor and the creditors.
The number of interest groups is by no means limited by the Restructuring Law. Therefore, especially in large restructurings, even dozens of them may emerge.
With this article, we wanted to draw your attention to some of the most important elements of the arrangement approval process and outline the role of the restructuring advisor who oversees the arrangement. In subsequent posts, we will present the remaining elements of the procedure in detail.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of April 12, 2023
author:
