Out-of-court settlements in the post-pandemic era
By Marzanna Sobaniec, Penteris
In June 2020, a “protective umbrella” was rapidly deployed to shield entrepreneurs in Poland from dire financial straits. This enabled them to take advantage of a “simplified restructuring procedure” mostly conducted out of court, which granted debtors greater flexibility and privileges.
This out-of-court restructuring procedure became popular among debtors threatened with bankruptcy, and has been pushing out traditional proceedings.
As a consequence, in 2020 and 2021 when economists sounded the pandemic alarm, a record low number of bankruptcies was announced in Poland.
Thanks to this simplified procedure, entrepreneurs have protection against creditors for a period of at least four months, and the process does not require the consent of a court to begin. In return, entrepreneurs receive protection against bailiffs and debt collectors – existing enforcements are suspended and new ones cannot be initiated, while all key contracts for the debtor, including lease, leasing or credit facilities cannot be terminated.
The popularity and usefulness of this procedure has resulted in it permanently entering the Act of Polish Restructuring Law. All benefits granted to debtors to date have been preserved and even extended. Debtor are not only safe from enforcement for a period of at least four months during which arrangements with creditors should be completed, but they also hold the right to pay for their obligations for the duration of the restructuring, and no payment moratorium has been adopted.
On the one hand, this will help maintain business continuity without discouraging small creditors who will be more willing to continue providing the debtor with ongoing benefits. On the other hand, this could involve the risk of pressure on debtors from the strongest creditors urging payment of their debts before others.
This opens up the field for competition between creditors and debtors, and the hope is that many valuable businesses will continue to operate, and the wisdom of entrepreneurs will prevail.
Marzanna SobaniecGGI member firm
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Marzanna Sobaniec is a Polish attorney-at-law, Partner of the Dispute Resolution Practice at Penteris. Handling multi-jurisdiction cases ranging from Real Estate, Energy, Banking, FMCG, and Construction, she works with diverse businesses, both from the private and public sectors. Marzanna’s broad experience in litigation, arbitration and mediation sees her find the most effective dispute strategies and business solutions for her clients.
Published: GGI Insider, No. 119, May 2022 l Photo: Roman Babakin - stock.adobe.com