1. When are you declared bankrupt?
Companies are declared bankrupt when they are unable to pay their certain, liquid and exigible debts. The minimum amount for a company to be declared insolvent – either by the debtor itself or by creditors – is approx. 8.700 EUR (40.000 Lei), outstanding for at least 60 days. Bankruptcy can also be requested by employees provided that the company has failed to pay at least 6 average salaries / employee.
2. How long does it take to process a petition for bankruptcy?
If the debtor makes the petition, the deadline is 10 days after its registration with the Court. If the petition is made by the creditor, such request shall be solved in 1 to 3 months. If the debtor pays the whole amount referred to in the petition by the first hearing, the bankruptcy request is dismissed.
3. What can you do if you disagree with the bankruptcy order by the court?
If a debtor is petitioning for its own bankruptcy, its creditors have the right to dispute such petition in 10 days after being informed about it. If a creditor is petitioning for bankruptcy, a debtor has the right to appeal such petition in 7 days after receiving the court resolution regarding the opening of the bankruptcy proceedings. A debtor is also entitled to request for the effects of such court resolution to be suspended until the appeal is solved by the judge.
4. What happens if you are declared bankrupt?
Once with the opening of the procedure, the company will no longer be managed by its former administrators or by its managers. The Court appoints an Official Receiver who will run the activity (or who will approve any administration acts – provided that the debtor was allowed by the Court to keep its administration right).
In case a bankruptcy proceeding is initiated or the debtor is declared bankrupt, its activity will only be limited to the liquidation of its goods and the distribution of its assets to its creditors – such activities being carried out by the Official Receiver. Foreclosures made by creditors regarding debts that existed before the opening of the insolvency proceedings shall be suspended by right. All debts must be written in the debtor’s list of creditors and may be turned to account only in accordance with the special provisions of the bankruptcy laws. Creditors who fail to request their registration on the creditor’s list within the deadline set by the judge, shall lose their debt recovery rights.
5. What duties and powers does the trustee have?
In case of a general and company reorganisation procedure the court appoints a trustee, while in case of a bankruptcy (winding-up) procedure the court appoints an Official Receiver. The Trustee will examine the debtor’s financial situation and shall prepare a report on the causes of the bankruptcy and on the persons who could be held responsible. The Trustee shall supervise the debtor’s activity (provided that the administration right was kept). If the Court has withdrawn such right, the Trustee shall manage the debtor’s activity. If the debtor is declared bankrupt, the Official Receiver shall represent the debtor and shall prepare all the necessary documents. The Trustee is entitled to terminate ongoing contracts, to request the annulment of wrongful acts and to request the liability of those who are found guilty for the debtor’s insolvency. The Trustee or the Official Receiver shall verify all debts on the creditor’s list, shall organize the creditors’ assembly and shall prepare reports regarding the activity they carry out. Moreover, they will represent the debtor in court and shall carry out all debt recovery proceedings.
6. What kind of obligations do I have as a bankrupt?
In 10 days after the opening of the bankruptcy proceedings, the former representatives of the debtor and the debtor himself must provide the Trustee and the Official Receiver with all the accounting documents of the company, its goods, archives and any other relevant documents. They must also reply to all requests of the Court and of the Trustee so as to maximize the payment possibilities of the debts in question.
7. How can I monitor the progress of the bankruptcy?
The Trustee or the Official Receiver shall prepare activity reports to be published in the National Bankruptcy Register and to be submitted to the bankruptcy file. The debtor’s creditors may personally review the company’s bankruptcy file at its registered office or may check the National Bankruptcy Register. Moreover, any summons related to the bankruptcy proceedings, meeting notices and other notices must also be published in the National Bankruptcy Register.
8. How long does a bankruptcy last?
According to the law, the monitoring period prior to the voting and approval of a reorganisation plan shall be of 12 months at most. In practice, this period can by far exceed these 12 months. Following the monitoring period, if a reorganisation plan was voted and confirmed, the initial reorganisation period can be of 3 years at most. If necessary, this reorganisation period may be extended to 4 years by amending the initial reorganisation plan. In case of bankruptcy proceedings, this period may vary a lot according to the duration of the debtor’s patrimony liquidation procedures – usually between 2 and 5 years.
9. Can I make arrangements with my creditors?
This is possible before the opening of the bankruptcy proceedings. Afterwards, arrangements with creditors shall be included in the reorganisation plan to be voted by the creditors and approved by the court of law.
10: How can an employee collect outstanding salary from his bankrupt employer?
Salaries that are already outstanding at the opening of the bankruptcy proceedings, shall be paid according to the reorganisation plan, if such a plan is voted and approved for. Otherwise, such salaries shall be paid as per the assets and liabilities of the debtor and if there are any available funds in this regard. Outstanding salaries are ranked after the costs incurred for the procedure itself, after any possible secured creditors and after any possible debts generated by financing granted to the debtor after the opening of the procedure. In case of salaries that have become outstanding after the opening of the procedure, they shall be paid as usual, in due time, until the debtor is declared bankrupt.
11. What important advice can be given to a company director in the event of imminent bankruptcy?
To pay great attention to protecting the interests of the company’s creditors, to try to negotiate with the creditors a possible debt restructuring and to try to apply a pre-bankruptcy procedure so as to avoid the opening of the bankruptcy proceedings. If such proceedings can’t be avoided, we suggest preparing a doable strategy for the reorganisation of the debtor’s activity following the opening of the bankruptcy proceedings and hiring qualified legal and financial advisers for legal assistance and support and for the necessary know-how.
12. Is there a special arrangement for a private person who is in danger of going bankrupt?
Romanian laws provide the possibility to implement two pre-bankruptcy procedures, namely the ad-hoc mandate and the arrangements with creditors. The ad-hoc mandate is a discreet procedure that enhances the conclusion of voluntary arrangements with creditors, while the actual arrangement with creditors is a more complex and transparent procedure which could lead to the suspension of certain recovery acts of creditors or to the decrease of these debts’ values.
For questions you can contact one of our insolvency specialists
Carmen Szabo & Andrei Coldea