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We look at the reforms to the insolvency law of Romania prompted by the coronavirus (COVID-19) pandemic. Written by Cristina Ienciu-Dragos, head of legal, CITR, Romania.
But it appears that, during the coronavirus pandemic, lots of Romanian companies are severely affected and we now expect that the number of insolvency cases will rise again during this year and next year. Some companies have completely or partially suspended their activity, such as restaurants, hotels, theatres, those in commercial areas and are either considering the decisions of Romanian authorities or the restrictions regarding movements of Romanian people, which influence their customers’ behaviour.
From 16 March 2020 until 14 May 2020, Romania was considered to be in a state of emergency, that allowed the authorities to impose different restrictions for activities, movement of persons and goods etc. Most court proceedings in all matters were suspended. This in turn, affected insolvency procedures and no reorganisation plans were approved by judges, and more generally, no bankruptcy procedures were opened and neither were insolvency practitioners or debtors’/creditors’ requests resolved. A general stay on the statute of limitations was in force during this period, supporting, actually, companies already in distress at the beginning of the pandemic.
During this time, only emergency cases were resolved by the courts. In insolvency matters, the courts considered:
Although no legislative changes have been made to the Romanian Insolvency Law during the state of emergency, some measures meant to support companies during this period were adopted by the Romanian Government.
Regarding insolvency, at the beginning of March 2020, we noticed a rise of requests for opening the insolvency procedure—which almost doubled every day compared to the usual daily requests, after an emergency state was declared—this number has now declined. Now, with the relaxation of measures and the re-commencement of court activity, we expect a new wave of insolvencies.
On 15 May 2020, the Romanian President approved the State of Alert Act. This Act entered into force on 18 May 2020. During this period of alert we expect a relaxation of restrictions, but most of the limitations regarding free of movement will be maintained and there will be some measures that will encourage a step-by-step restart for most activities.
We outline below the most important measures adopted regarding insolvency:
Insolvency request filed by the debtor—the obligation of a debtor to declare its insolvency within 30 days of having met the insolvency requirements will be suspended during the state of alert and another 30 days from the date this state ends. This measure offers to the companies a period to analyse both of the financial state of the company, insolvency causes and a real possibility of recovery.
Also, if the debtor’s activity was suspended, completely or partially, during the state of emergency, the value of their debts must be RON50,000 (different from RON40,000 under the general law of insolvency).
The minimum claim must be RON50,000 if the debtor’s activity was suspended, completely or partially, during the state of emergency.
Also, the minimum claim must be RON50,000, if debtor’s activity was suspended, completely or partially, during the state of emergency.
The observation period is extended by an additional three months—from 12–15 months—to give companies that intend to submit a reorganisation plan the time to analyse the impact of the pandemic on the business and on its chances of reorganisation.
The reorganisation plans submitted but not yet approved by the judge can be changed within a three month period if the perspectives change as a consequence of the coronavirus pandemic. Any intention to make changes must be announced by the judicial administrator to creditors within 15 days of the entering in force of the law.
If a reorganisation plan is ongoing, but the debtor’s activity was suspended, totally or partially, during the state of emergency, the debtor can file a request for suspending the reorganisation period for two months. Such a request should be filed within 30 days from the entering into force of the law.
Also, the reorganisation plan period can be extended from four years to a maximum of five years.
Any enforcement proceedings concerning the current debts (from the insolvency period) is suspended during the state of alert, even if the claim has been due for more than 60 days.
We look at various countries worldwide which are expediting reforms to their restructuring and insolvency laws, temporarily suspending onerous insolvency law provisions, increasing limits for statutory demands, suspending enforcement powers and introducing other measures to deal with the coronavirus crisis. As the situation is rapidly evolving with more countries adding new measures daily, you should contact local lawyers in the relevant jurisdiction to check the current measures in force.
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