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Restructuring Agreement Between A Debtor And Its Creditors, A New Means To Prevent Insolvency

Publication: Bursa

The Ministry of Justice has put forward for public debate the draft law for amendment of Law 85/2014 on the Insolvency Prevention Proceedings and Insolvency. Among the proposed amendments there is also a new means to prevent insolvency, and namely the conclusion of a Restructuring Agreement between a debtor and its creditors.

The necessity of regulation derives, on the one hand, from the desideratum to standardize the European legislations on preventive restructuring (the draft law transposes Directive (EU) 2019/1023), and also from the finding that, at a national level, the existing institutions for prevention of insolvency have proven to be non-functional, affecting the possibility to redress businesses. Thus, both the ad-hoc mandate and the arrangement with creditors have been used rarely and tardily and, in general, have not prevented the opening of the insolvency proceeding.

Restructuring Agreement in short

  • A restructuring agreement proceeding is a more flexible and confidential mechanism meant to prevent insolvency to which professionals in difficulty may resort and that replaces the ad-hoc mandate.
  • The conclusion of the restructuring agreement relies upon negotiation between a debtor and its creditors, in a context of maintaining by a debtor of its control on its own business, but also of the possibility to continue enforcements.
  • A restructuring agreement is a minimally judicial proceeding ensuring legal comfort for its creditors because it is validated by a syndic judge (or by an insolvency practitioner in special hypothesis), it allows the exercise of means of appeal and, finally, leads, if successful, to the prevention of insolvency and a debtor’s discharge of its debts.

Alexandru Iorgulescu details in this article the most important aspects of the procedure, such as:

Why is there need for a new insolvency prevention proceeding?

Who can benefit from the Agreement?

In what conditions can a debtor resort to this proceeding?

How does the Restructuring Agreement work?

Who drafts and negotiates the Restructuring Agreement?

The procedure of approval and confirmation of the Agreement

What novelty elements does the new proceeding bring about?

How does the Restructuring Agreement terminate?

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