This country-specific Q&A provides an overview of Restructuring & Insolvency laws and regulations applicable in Poland.
What forms of security can be granted over immovable and movable property? What formalities are required and what is the impact if such formalities are not complied with?
Registered pledge can beestablished on movable propertyand transferable property rights. It isgovernedby the Act on registered pledge and Register of Pledges (O.J. 1996, No 149, item 703, as amended). The pledge agreement and entering the pledge into the Register od Pledges are required in order to successfully establish registered pledge. The pledge agreementshould be made in writing.
Mortgage can be established on immovable property. It is governedby the Act on Land and Mortgage Registers and Mortgage (O.J. 1982, No 19, item 147, as amended). There are two main types of mortgages regulated under the Act on Land and Mortgage Registers and Mortgage: contractual mortgage and compulsory mortgage.The mortgage is established effectivelyprovided that relevant entry has been made in theLand and Mortgage Register. It is also necessary to comply with requirements as to the document that constitutes the basis for entering mortgage into the Land and Mortgage Register (e.g. notarial deed, Court’s decision in the case of compulsory mortgage), as well as requirements as to the form of the document (drawn up in writing with a signature certified by notary, or in the form of anotarial deed).
Mortgage and registered pledge become valid provided that competent Court makes relevant entry into the Land and Mortgage Register or the Register od Pledgesrespectively.
If the application for entering mortgage or registered pledge into respective register does not comply with formal requirements set out in Polish law,depending on gravity and type of the failure (in particular errors and omissions), the Court requests applicant to remedy any errors or omissions, under the pain returning application to the party, or dismisses the application if given failure is irremediable.
There also exist less popular securities in the Polish legal system, e.g.pledge, treasury pledge or ship’s mortgage.
What practical issues do secured creditors face in enforcing their security (e.g. timing issues, requirement for court involvement)?
Enforcing the security, in majority of situations, is executed within judicial proceedings, hence the biggest practical issue is the necessity of the Court’s involvement.That is the reason why enforcing the security may take a lot of time. Moreover, it is often that after obtaining the enforcement in judicial proceedings, it is also necessary to initiate enforcement proceedings with the involvement of a bailiff. In most of the situations enforcing the security requires the creditor to take a number of actions, which results in a long duration of proceedings. Furthermore, the initiation of legal proceedings also entails the payment of court fees.
In some cases it is possible to reduce the number of actions that need to be taken in judicial proceedings (e.g. in case of a notarial deed in which the debtor submits to enforcement), or even to enforce security within extrajudicial proceedings, e.g. in case oftakingover ownership of the pledged property or by sale of an asset encumbered with a registered pledge in a public tender conducted by a notary or bailiff
What is the test for insolvency? Is there any obligation on directors or officers of the debtor to open insolvency procedures upon the debtor becoming distressed or insolvent? Are there any consequences for failure to do so?
Under the Polish law, insolvent is a debtor, who has lost the ability to fulfill his matured pecuniary liabilities.A debtor which is a legal person or an organizational unit without legal personality upon which a separate Act confers legal capacity, may be also considered insolvent if its pecuniary obligations are in excess of the value of its assets, excluding conditioned and future obligations as well as those resulting from loans given by the shareholders, and this state of facts persists throughout a period exceeding twenty four months.
Any individual authorized to represent the debtor and to manage debtor’s affaires under the law or articles of association (board members in particular) is obliged to file a bankruptcy petition within the due date – which falls 30 days after the grounds for declaring bankruptcy arise.
Article 299 of the Commercial Companies Code (in the case of the management board of limited liability company), Article 21 para 3 of the Bankruptcy Law, and other legal provisions, including criminal liabilityand liability for tax obligations,set the board members’ and other persons’ (upon whom the obligation to file a bankruptcy petition rests) liability towards creditorsfor obligations of insolvent bodyin the event the bankruptcy petition is not filed within the due date.
What insolvency procedures are available in the jurisdiction? Does management continue to operate the business and/or is the debtor subject to supervision? What roles do the court and other stakeholders play? How long does the process usually take to complete?
In Poland, with regard to insolvency procedures, there exists one insolvency procedure – liquidation bankruptcy. The Bankruptcy Law regulates that in result of declaring bankruptcy the debtor loses the right to manage and operate business. The trustee appointed by the Bankruptcy Court, is the person who takes over temporarily (for duration of bankruptcy proceedings) responsibility to manage and operate the debtor’s business.The Court and appointed Judge-Commissioner supervise the trustee and issue several decisions within the course of proceedings. There is also possibility to establish Creditor’s Committee, which receives several competences of the Judge-Commissioner. Individual creditors can also receive information and may play active role within proceedings.
The latest amendments in the Bankruptcy Law introduced new solution for debtors that are natural persons other than sole traders (consumer debtors) by implementing a possibility to conclude the arrangement between the debtor and the creditors. Moreover, consumer bankruptcy proceedings provide for the institution of residual debt release. Once the part of the debtor’s obligations are fulfilled under and in accordance with the creditors’ repayment plan, the debtor may bereleased from the rest of its liabilities.
As of today, estimated duration of bankruptcy proceedings in Poland is up to few years. Duration of proceedings is determined by constantly growing number of consumer bankruptcy, which is conducted in the same Bankruptcy Courts.The latest changes in Polish Bankruptcy Law provide new possibilities for consumers thanks to which declaring bankruptcy will likely besimplified and easier than before. In respect of those who have deliberately led to their debtsit will be also permissible and possible to declare bankruptcy. Natural persons engaged in business activities now also have the same rights as consumers filing for the bankruptcy.
How do creditors and other stakeholders rank on an insolvency of a debtor? Do any stakeholders enjoy particular priority (e.g. employees, pension liabilities)? Could the claims of any class of creditor be subordinated (e.g. equitable subordination)?
Rank of claims is regulated within the Bankruptcy Law. The main ruleis to satisfy with the highest priority (satisfy in the first place)costs of proceedings and other liabilities of the bankruptcy estate. The latest amendments to the Bankruptcy Law introduced also the priority for the amounts received from liquidation of the living accommodation of the bankrupt who is a natural person.It is necessary to satisfy housing needs of the bankrupt and the persons dependent on him, the amount corresponding to the average lease rent of living accommodation for a period from twelve months to twenty four months shall be awarded to the bankrupt from the amount earned from the sale of such accommodation or house. Remaining claims are satisfied in the order specified inArticle 342 of the Bankruptcy Law, depending on category to which they fall (claims falling into the lower category may be satisfied only if claims falling into higher categories have been fully satisfied). First category of claims covers among others: employees’ claims,maintenance claims and workers’ compensation, social security contributions defined in the Social Security System, certain amounts resulting from restructuring proceedings of the debtor.
Apart from the rank of claims, the secured creditors enjoy preferential treatment with regard toliquidation of secured assets.Except as otherwise provided in specific regulations, secured creditors should be satisfied from the proceeds of the liquidation of the encumbered asset, reduced by the costs related to the liquidation of the asset and other costs of bankruptcy proceedings in an amount not higher than one-tenth of the sum obtained by liquidation, but no more than such part of costs of the bankruptcy proceedings which results from the ratio of the value of the encumbered object to the value of the whole bankruptcy estate.
Can a debtor’s pre-insolvency transactions be challenged? If so, by whom, when and on what grounds? What is the effect of a successful challenge and how are the rights of third parties impacted?
Under Polish Bankruptcy Law, particulartransactions (or broaden: acts in law), are – by operation of law – ineffective with respect to the bankruptcy estate or may be declared ineffective with respect to the bankruptcy estate by the Judge – Commissioner’s decision. In result – said transactions or acts in law are construed within bankruptcy proceedings as they have never occurred.
Acts in law that may be challenged include among others those performed gratuitously (or significantly undervalued) within 1 year before filing the bankruptcy petition, whereby the debtor disposed of his assets. The same applies respectively to the court settlement, admission of an action, and waiver of a claim.
Moreover, ineffective with respect to the bankruptcy estateare securities and payments of an unenforceable debt, given or made by the debtor within 6 months before filing the bankruptcy petition.
There is also possibility to challenge by the Judge-Commissioner transactions with related-parties and/or family, performed by debtor within 6 months preceding the date of filing the bankruptcy petition, as well as encumbrance of the bankrupt’s assets with (among others) mortgage or registered pledge, if the bankrupt was not a personal debtor of the secured creditor and if the encumbrance was established within one year prior to the filing of a bankruptcy petition, and the bankrupt did not receive any consideration for the establishment of such encumbrance.
The other party to ineffective transaction/ act in law is obliged to contribute to the bankruptcy estate anything that has been transferred out of, or has not been contributed to, in result of ineffective act.
In certaincases reciprocal consideration provided by other partymay be returned to the same. If the consideration cannot be returned, that party may assert its claims in bankruptcy proceedings on a par with other creditors.
On the other hand, partywho received the payment or the security may, by bringing an action or charge, seek the recognition of such acts as effective if at the time when the same were performed they were unaware of the existence of grounds for declaring bankruptcy.
What form of stay or moratorium applies in insolvency proceedings against the continuation of legal proceedings or the enforcement of creditors’ claims? Does that stay or moratorium have extraterritorial effect? In what circumstances may creditors benefit from any exceptions to such stay or moratorium?
Under Polish Bankruptcy Law, declaring bankruptcy results in stay of enforcement proceedings, and moratorium to commence such proceedings.Regarding other legal proceedings – if the bankruptcy is declared court and administrative proceedings in respect of the bankruptcy estate may be initiated and continued by no other than the trustee, or against him. The trustee conducts proceedings on behalf of the bankrupt, but in his own name.
Enforcementproceedings initiated prior to declaration of bankruptcy, should be, by operation of law, stayed on the date of declaration of bankruptcy. Once decision on declaring bankruptcy becomesfinal and non-appealable such proceedings should, by operation of law, be discontinued.Declaring bankruptcy is not an obstacle for awarding immovable property ownership if the bid for the property was validly knocked down prior to the declaration of bankruptcy and the execution acquirer pays the acquisition price on time.
Saidlegal instruments have extraterritorial effect.
What restructuring and rescue procedures are available in the jurisdiction, what are the entry requirements and how is a restructuring plan approved and implemented? Does management continue to operate the business and/or is the debtor subject to supervision? What roles do the court and other stakeholders play?
In Poland, there are 4 restructuring proceedings: arrangement approval proceedings, accelerated arrangement proceedings, arrangement proceedings and remedial proceedings.
In addition, there is also a possibility to conclude partial arrangement, covering creditors selected based on objective criteria.Conclusion of partial arrangement is allowed in arrangement approval proceedings and accelerated arrangement proceedings.
There are various forms of restructuring of the debtor’s obligations within all kinds of restructuring proceedings, for instance debt-for-equity swap, reducing the amount of debtor’s obligations or spreading repayment into instalments. It is also permissible, however as an exception, to vote,conclude the arrangement and adoptit within bankruptcy proceedings.
One of the most interesting new rescue proceedings is pre-packaged sale (pre-pack), regulated in the Bankruptcy Law. Pre-pack is yet not as popular as it is for instance in the USA or UK, where around 25% of all applications include pre-pack, and one of the highest value acquisitions are made within pre-packaged liquidation procedures. However, there are solid grounds to presume that also in Poland the pre-pack procedure will gain popularity, mainly because while acquiring in pre-pack, investor enjoys execution sale effect, what means that the investor is not liable for liabilities and commitments of the debtor secured on the subject of pre-pack. Moreover, transaction executed within pre-pack procedure is relatively quick and investor acquires enterprise as functioning company, ready to continue conducting business. Pre-pack sale is also possible in favour of affiliated entities, however the price cannot be less than stated by the Court’s appraiser. The Court’s decision whether to approve or not sale-purchase conditions, is made by the Bankruptcy Court, along with the decision regarding declaring bankruptcy.
The latest amendments to the Bankruptcy Law reorganized the pre-pack procedure and introduced auction-like instruments. Where at least two applications for approval of the terms of sale have been filed, an auction shall be conducted between acquirers in order to select the most favourable terms of sale.The submission of the application for approval of the terms of sale shall be announced in order to inform creditors and potential acquirers of the possibility of attaching their application to their own bid for the acquisition of the business in a pre-pack procedure. Pre-pack is intended for selling enterprise as ongoing business, with significant benefit which is execution sale effect, meaning that the investor is not liable for liabilities and commitments of the debtor. The application for approval of the terms of sale may refer to more than one acquirer. In general, recent amendments to the Bankruptcy Lawin scope of pre-pack regulation should be regarded as favourable, however a lot depends on how smoothly the Bankruptcy Courts will operate, especially with regard to time issues.
For each of restructuring proceedings the debtor may file upon insolvency or threat of insolvency. For arrangement approval proceedings and accelerated arrangement proceedings, there is additional premise. Those proceedings may be conducted provided that the total sum of disputed receivable debts giving the right to vote on the arrangement does not exceed 15% of the total sum of receivable debts giving the right to vote on an arrangement, while for arrangement proceedings and remedial proceedings, the sum of disputed claims may exceed 15% of the total sum of receivable debts giving the right to vote on an arrangement.
Management of the debtor’s enterprise remains in hands of currentboard members, however is performed under supervision of the Court Supervisor (in certain circumstances, for example if the debtor has violated the law with regard to the administration of assets thereby causing or threatening to cause detriment to the creditors, it is possible to revoke debtor’s administration of the enterprise).In remedial proceedings however the Court appoints Receiver, who usually takes over the responsibility to manage the debtor’s enterprise.
Restructuring plan is prepared by the Arrangement Supervisor (within arrangement approval proceedings) or by the Court Supervisor (within accelerated arrangement proceedings and arrangement proceedings). The restructuring plan is thenimplemented by the debtor under supervision of appointed supervisor.
Within remedial proceedings the restructuring plan is prepared by the Receiver. Receiver is also the person who implements the restructuring plan once it is approved by the Judge – Commissioner. The creditors vote on the arrangement once the restructuring plan is implemented fully or in part.
The Court and the appointed Judge – Commissioner supervise the course of proceedings and issue some ruling thereof.
It is also possible within restructuring proceedings to establish Creditors’ Committee (said body may i.a. change the person of the Court Supervisor or of the Receiver, or decide that administration of the enterprise should be kept by the debtor). Creditors may also submit their own arrangement proposals.
Can a debtor in restructuring proceedings obtain new financing and are any special priorities afforded to such financing (if available)?
Such possibility exists, and up to the certain limit new financing may enjoy preferential treatment under certain conditions, especially in the event ofunsuccessful restructuring when case leads to the bankruptcy. In such situation financing is satisfied within the first category of claims in bankruptcy proceedings.
Can a restructuring proceeding release claims against non-debtor parties (e.g. guarantees granted by parent entities, claims against directors of the debtor), and, if so, in what circumstances?
Such possibility exists, but is of extrajudicial,less formaland less strict nature – usually is done within workouts or standstill agreements, instead of formal restructuring proceedings.
Is it common for creditor committees to be formed in restructuring proceedings and what powers or responsibilities do they have? Are they permitted to retain advisers and, if so, how are they funded?
Establishing Creditors’ Committees ismuch more common in restructuring proceedings than within bankruptcy proceedings. It is driven, in a broad sense, by nature of the Restructuring law, which is formed for active creditors.
Creditors’ Committee exercisescontrol and supervisionover the acts of the Court Supervisor and the Receiver. Said body may audit the books and documents of the debtor’s enterprise and demand explanations from the debtor. Creditors’ Committee is entitled to grant permission for several actions of the debtor, e.g.encumbering components of the arrangement estate or remedial estate with a mortgage, pledge, registered pledge or ship’s mortgage in order to secure a receivable debt which is not covered by the arrangement; transfer of ownership of things or rights for securing a receivable debt which is not covered by the arrangement; encumbering components of the arrangement estate or remedial estate with other rights; taking out credits and loans; sale of assets of the value exceeding 500.000 PLN; concluding a contract of tenancy of a debtor’s enterprise or an organized part thereof, or any other similar contract.
Members of Creditors’ Committees can act with advisers, but funding should be secured by themselves. Creditors’ Committee member is entitled to the reimbursement of necessary expenses involved in his participation in a meeting of Creditors’ Committees. The judge-commissioner may grant a member an appropriate meeting attendance remuneration if it is justified by the kind and degree of complexity of the case and the extent of work performed.
How are existing contracts treated in restructuring and insolvency processes? Are the parties obliged to continue to perform their obligations? Will termination, retention of title and set-off provisions in these contracts remain enforceable? Is there any ability for either party to disclaim the contract?
Restructuring proceedings such as arrangement approval proceedings, accelerated arrangement proceedings and arrangement proceedings, do not affect the existing contracts and assets. Any changes, terminations, withdrawals are subject to civil law regulations. In remedial proceedings it is possible for the receiver to renounce the mutual contract which has not been performed in full or in part.
Under Article 98 of the Bankruptcy Law appointed trustee may, with the prior consent of the Judge – Commissioner, perform the debtor’s obligation resulting from contract and demand the other party to render reciprocal performance, or withdraw from the contract with effect as of the date of declaration of bankruptcy. It is also possible to withdraw from a reciprocal contractby appointed Receiver under the Restructuring Law – in remedial proceedings.
Certain contracts’ clauses may be questioned under the Bankruptcy Law, e.g. clause stipulating that a legal relation to which the bankrupt is a party, may be modified or terminated if a bankruptcy petition is filed or if bankruptcy is declared. Such a clause under the Article 83 of the Bankruptcy Law is invalid. Clauses preventing or hindering the achievement of the purpose of bankruptcy proceedings have no effect to the bankruptcy estate.
Moreover, as to the: contract of agency, contract of lending for use, contract of loan, contract of lease or tenancy, credit contract, contracts of bank account, contracts of securities account, contracts of derivatives account or settlement account, or contracts of operating an omnibus account, as well as contracts for making safe-boxes available and contracts for safekeeping, leasing contracts or mandatory property insurance contracts,the Bankruptcy Law provides individual and specific regulations reflecting nature of said contracts. In particular, the Bankruptcy Law regulates possibility of expiration of the contract by operation of law, possibility to withdraw from contract or to terminate contract.Similarly, any clause in those contracts stipulating that a legal relation to which the bankrupt is a party is modified or terminated if a bankruptcy petition is filed or if bankruptcy is declared may be considered as invalid. Any provision of the contract to which the bankrupt is a party that prevents or hinders the achievement of the purpose of bankruptcy proceedings shall be of no effect to the bankruptcy estate.
Under the Restructuring Lawthere are some restrictions as to the possibility of termination of the tenancy contract and lease contractof the unit or immovable property, in which the debtor’s undertaking is run.
What conditions apply to the sale of assets / the entire business in a restructuring or insolvency process? Does the purchaser acquire the assets “free and clear” of claims and liabilities? Can security be released without creditor consent? Is credit bidding permitted? Are pre-packaged sales possible?
In restructuring proceedings the sale of the debtor’s assets (including his entire business) can be subject to the arrangement and in this respect is subject to a vote by the creditors’ meeting, followed by the approval of the arrangement by the court. It is also possible for a debtor to sell particular assets with the consent of a Court Supervisor, if such sale exceeds the scope of ordinary management. If a real estate or other assets with a value above 500 000 PLN are subject to sale, it is additionally required to obtain the consent of the Creditors’ Committee for the sale.
In bankruptcy proceedings, the sale of assets is one of the basic activities of the trustee, who should aim to sell the debtor’s business as a whole. When selling certain assets in way of a tender, it is necessary to obtain the judge-commissioner’s approval for terms of the tender. In the case of a direct, unrestricted sale of assets, the consent of the Creditors’ Committee is required, followed by the approval of the judge-commissioner. In case of selling the entire business, it is necessary to prepare a description and valuation of the debtor’s business enterprise provided by an expert appointed by the trustee.
Sale of assets/business within bankruptcy proceedings enjoys execution sale effect, what means that the purchaser acquiresunencumbered asset (“free and clear” of claims and liabilities), security expires even without the permission of secured creditor, whilesuch creditor is satisfied from money received in result of sale transaction.
In restructuring proceedings sale of assets (organized part of the enterprise, or the entirebusiness) enjoys execution sale effect only within remedial proceedings. In other restructuring proceedings sale, including the saleexecuted under the arrangement and in performance of the arrangement which provides for the satisfaction of creditors by liquidation of the debtor’s assets,does not have the effects of execution sale. Therefore, the rights and securities established on sold assets remain in force, what may have an impact on the purchase price of the assets. Given lack of execution sale effectthe acquirer becomes a limited debtor in the sense that acquirer has to enduresenforcement proceedings directed to encumbered asset. It is possible however to release the securitywith the prior consent of secured creditor.
Credit bidding is planned to be introduced within amendment to the Bankruptcy Law, which is currently in legislative process.
Pre-packaged sale (so-called “pre-pack”, also known as“prepackaged administration” or “prepared liquidation”) has been introduced in Polish Bankruptcy Law, and since 2016 may be applied. . Pre-pack transactions are beneficial for all involved parties and become more and more popular among creditors and debtors.
What duties and liabilities should directors and officers be mindful of when managing a distressed debtor? What are the consequences of breach of duty? Is there any scope for other parties (e.g. director, partner, shareholder, lender) to incur liability for the debts of an insolvent debtor?
Most important legal duty of the board members relates to filing the bankruptcy petition in the due time. Failure to do so can result in liability towards creditors – directly from board member’s assets.
The management board is obliged also to ensure that all creditors are treated equally, and they areproportionally satisfied. The management board may be liable for damages caused to the creditors in the event of selective satisfaction of certain creditors, as well as in the case of establishing security in favour of certain selected creditors to the detriment of remaining creditors. Such action of the management board may cause (in certain cases)criminal liability of board members.
Other parties cannot incur liability for debts of insolvent debtor. However, if given act in law is declared ineffective due to detriment of creditors, the creditors may be satisfied from consideration received by other party to the act.
Some changes to this provisions are proposed due to the COVID-19 pandemic.
Do restructuring or insolvency proceedings have the effect of releasing directors and other stakeholders from liability for previous actions and decisions?
Under the Polish Law, there is no direct regulation ofrelease of liability for previous actions performed and decisions made by directors or stakeholders. Filing the bankruptcy petition, opening of restructuring proceedings or approving the arrangement within arrangement approval proceedings – made within 30days after the grounds for declaring bankruptcy arise, release members of the board (or other persons obliged to take action in accordance with the law) from liability for insolvent debtor’s obligations.
Will a local court recognise concurrent foreign restructuring or insolvency proceedings over a local debtor? What is the process and test for achieving such recognition? Has the UNCITRAL Model Law on Cross Border Insolvency or the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments been adopted or is it under consideration in your country?
In Poland, like in other EU countries, concurrent proceedings are automatically recognized and there is also possibility of commencement of secondary insolvency proceedings, limited to assets located on the territory of Poland.
With regard to other countries, recognition is usually regulated in bilateral agreements, most commonly compliant with UNCITRAL.
Can debtors incorporated elsewhere enter into restructuring or insolvency proceedings in the jurisdiction?
Yes, if their place of business (so-called COMI – center of main interest) is located within territory of Poland. Moreover, according to Polish regulations, if the COMI is located in the Republic of Poland, then main insolvency proceedingsis subject to exclusive jurisdiction of Polish courts (however with possibility of initiating secondary insolvency proceedings in other EU member states).
How are groups of companies treated on the restructuring or insolvency of one of more members of that group? Is there scope for cooperation between office holders?
There is space for cooperation between office holders in the case of groups of companies treated on the restructuring or insolvency of one or more members of that group, but informally, given there is no direct legal basis for such activities. Restructuring and insolvency of groups of companies is regulated under the EU Law only and it touches international cases, not domestic groups of companies.
Is it a debtor or creditor friendly jurisdiction?
Polish system of regulations related to insolvency has been amended significantly quite recently because of i.a. lack of effectiveness in satisfaction of creditors and insufficient number of successful restructuring procedures conducted within bankruptcy with possibility to conclude the arrangement.
After the reform of 2016, there are now 4 new restructuring proceedings, and new legal institution – pre-packaged liquidation/administration, based on British and American regulations – so called pre-pack, regulated in the Bankruptcy Law.
All this new legal instruments create a framework which places Poland as beneficial and encouraged restructuring environment for both –debtor and active creditors. It should be pointed out however, that the Restructuring Law significantly improved the situation for the debtor with relation to previous law provisions, and – what is even more important –pre-packaged sale has been introduced in Poland, which is beneficial for all involved parties – insolvent debtors, creditors, investors, the economy and the judiciary.
Do sociopolitical factors give additional influence to certain stakeholders in restructurings or insolvencies in the jurisdiction (e.g. pressure around employees or pensions)? What role does the state play in relation to a distressed business (e.g. availability of state support)?
In Poland, state sometimes plays active role in restructuring by agencies or state-aid, when it is available and allowed under the EU regulations. Quite often that leads to improvement ofemployees’ situation and protection of workplaces.
What are the greatest barriers to efficient and effective restructurings and insolvencies in the jurisdiction? Are there any proposals for reform to counter any such barriers?
The greatest barrier to efficient and effective restructuring and insolvencies in Poland is the lack of division in Courts between complicated and complex restructuring and sometimes small, but numerous consumer bankruptcies which number is constantly growing. That means that judges in Bankruptcy Courts are handling too many cases, and thus the Court’s decisions are delayed.
There is significant reform of 2019, addressing also abovementioned scope, but it surely will take time to restore effectiveness within Bankruptcy Courts.
The amendment is focused on carrying on consumer bankruptcy proceedings by Insolvency Practitioners (trustees), with much less Court involvement. However, given the relaxation of regulation of the consumer bankruptcy, the number of consumer bankruptcy petitions is expected to grow, especially due to the COVID-19 pandemic, affecting not only businesses, but individuals as well.
Also, individual, micro-entrepreneurs will be treated as consumers, what will result in growth in number of petitions as well.
Another obstacle is lack of electronical system, which is planned to be implemented and enter into force by December 2020.