A. Changes in insolvency law
On 1 January 2016, an amendment entered into force of the Act of 28 February 2003 – Insolvency and Rescue Law, renaming it Insolvency Law, and introducing a number of other modifications, such as:
- a new definition of insolvency – a debtor is deemed insolvent when it has lost the ability to settle its due and payable cash liabilities;
- presumption of insolvency – a) if the default in settling cash liabilities is longer than three months, b) in the case of legal persons and legal persons without corporate status, if the value of cash liabilities is higher than the value of the assets of a given entity, and this state continues for more than two years (24 months);
- introduction of a single type of insolvency (no distinction between insolvency including the liquidation of the debtor’s assets and insolvency open to composition agreements – although it is still possible to conclude a composition agreement);
- determining the persons obligated to file a declaration of insolvency (i. e. all persons who, pursuant to the law, the bylaws or the articles of association, are entitled to manage the debtor’s business affairs and to represent it, individually or jointly with other persons);
- the liability for damages of the person obligated to file a declaration of insolvency on the basis of alleged guilt, limited in case of creditors to the amount of receivables due and payable to the creditor from the debtor;
- the term for filing a declaration of insolvency has been prolonged from 14 to 30 days;
- the jurisdiction of the insolvency court shall be established according to “the centre of main interests of the debtor”;
- the possibility of selling the enterprise through the so-called pre-pack liquidation after the court has approved the conditions of sale of the debtor’s enterprise, of its organized part, or of assets constituting a substantial part of the enterprise.
B. Restructuring law
Entrepreneurs at risk of insolvency have at their disposal, as of 1 January 2016, new forms of rescue proceedings, conducted pursuant to Act of 15 May 2015 – Restructuring Law.
The aim of restructuring proceedings is to avoid declaring insolvency by making it possible for the debtor to restructure through a composition agreement with creditors, and in case of recovery proceedings, also through recovery actions, protecting the creditors’ legitimate rights. The following types of proceedings are distinguished:
- composition approval proceedings;
- accelerated composition proceedings;
- composition proceedings;
- recovery proceedings.
Where insolvency proceedings concur with restructuring proceedings, priority is given to the request to open restructuring proceedings, and the insolvency court suspends the examination of the declaration of insolvency until the restructuring proceedings are finished.
Requests to open restructuring proceedings are examined by restructuring courts, i. e. by district courts – commercial courts with jurisdiction over the centre of main interests of the debtor.
A licensed insolvency practitioner participates in the proceedings as a supervisor or receiver.
Unless a receiver has been appointed, the debtor remains in control of the assets. Opening restructuring proceedings does not influence the debtor’s legal capacity or its capacity to perform acts in law. After the court decides to open restructuring proceedings, the entrepreneur continues to operate under the same business name, with the indication “restructuring” added.
In 2018, a Central Registry of Restructuring and Insolvency is to be created, which will include, among other things, a search engine of insolvency cases.