CONCORDAT OVER SUSPENSION OF BANKRUPTCY
The Law Amending the Code of Execution and Bankruptcy and Certain Laws numbered 7101 was published on the date of 15 March 2018.
As per this amendment, debtor companies may request concordat in order to be able to pay their debts or dispose of a bankruptcy. In other words, a debtor who is not able to pay its debts on maturity date or is under the risk of being unable to pay the debts on maturity date, may resort to concordat so as to pay its debts or dispose of bankruptcy by granting a time or making a deduction.
Concordat is defined as an agreement which enables debtors subjecting to bankruptcy to fix their financial status and dispose of bankruptcy through restricting of debts; creditors to recover their claims with a specified deduction or at the specified period, and which becomes binding for parties by the affirmation of court.
The new concordat proceedings is as follows:
- A "temporary concordat period" of up to 3 months with a possibility of extension up to 2 months will be granted to debtors while the court assesses the proposed restructuring plan. "Temporary concordat periods" will generally carry the same consequences and offer the same debtor relief as a definitive concordat period.
- A "definitive concordat period" of up to 1 year with a possibility of extension up to 6 months will be granted to debtors when their restructuring plan is approved.
- Definitive concordat periods can be cancelled and concordat applications can be rejected by the court if the debtor's financial situation sufficiently improves.
- The court may appoint a "creditors committee" consisting of up to 7 (seven) creditors in order to ensure that creditors are appropriately represented in any related proceedings.
- All debt collection and enforcement proceedings including for State claims under the Law on the Collection Procedure of Public Receivables will not be suspended during the definitive concordat period. However, attachment proceedings can be initiated for claims that benefit from a preference under law and security enforcement proceedings may be initiated but secured assets may not be sold or confiscated.
- Unless otherwise stated in the concordat project, no further interest will accrue on unsecured claims.
- Commercial agreements may not be terminated as a result of the initiation of concordat procedures or the debtor's concordat request and claims may not be accelerated for this reason.
- Article 307 of the CEB, which provides debtors the ability to defer the sale of pledged assets for a maximum period of 1 (one) year during concordat proceedings, now extends to assets sourced by way of financial leasing.