insolvency and restructuring
On 24 June 2020, a new restructuring procedure entered into force, enabling businesses to carry out debt relief smoothly without undue judicial interference. Potential risks and doubts may arise on the part of creditors on how to counteract the negative effects of opening these proceedings. Simplified restructuring is a hybrid of solutions provided for in other restructuring procedures, allowing the debtor to enter into an arrangement with creditors while ensuring extensive protection against enforcement and termination of key contracts.
If execution or bankruptcy proceedings are commenced against the owner of leased or tenanted real estate, the lease or tenancy contract may be terminated early by the administrator or trustee. Rent paid in advance may then be deemed ineffective. How should lessees and tenants protect themselves when entering into a contract with an owner in poor financial condition?
For nearly four years, Polish businesses have been in a possession of an important tool to restructure their debt and return to economically sustainable operations. Our experience since the Restructuring Law has been in force shows that with proper selection and cooperation with creditors, the new court procedures have many advantages and can lead to effective debt reduction. At the same time, we see room for improvement in the current regulations, which cannot be corrected through the practice of the authorities and participants in the restructuring process alone.
The Polish Supreme Court has confirmed that there is no reason not to confirm that a foreign judgment against a bankrupt company is enforceable, and issue an enforcement clause. Courts of lower instance have ruled out this possibility.
Starting a new business or establishing relations with other businesses always carries with a certain degree of risk. Thus an extensive legal background check of a prospective business partner will usually be advisable. The question is what is the reasonable scope of such a check and what sort of information may be obtained from public sources.
Can public companies and others operating on a large scale and needing to restructure their debt take advantage of in-court restructuring using the mechanisms in the Restructuring Law?