Insolvency Law at Romania
Romania's insolvency framework is primarily governed by Law No. 85/2014 on Preventing Insolvency and Insolvency Proceedings. This legislation provides a structured approach to address financial distress among individuals and entities. In 2023, several amendments were introduced to enhance the efficiency and fairness of insolvency procedures. (Restructuring and insolvency law in Romania | CMS Expert Guides)
⚖️ Legal Framework
The Insolvency Code (Law No. 85/2014) outlines procedures for: (Insolvency 2023 - Romania | Global Practice Guides | Chambers and Partners)
Reorganisation (Reorganizare judiciară): Aimed at rehabilitating a financially distressed debtor and preserving its business operations. During reorganisation, the debtor proposes a restructuring plan to its creditors, seeking their approval. The plan may involve debt rescheduling, debt forgiveness, or other measures to improve the debtor’s financial situation. If the restructuring plan is approved by a qualified majority of creditors and confirmed by the court, the debtor can continue its operations while adhering to the terms of the plan. (Restructuring and insolvency law in Romania | CMS Expert Guides)
Bankruptcy (Faliment): An insolvency procedure in which the debtor’s assets are liquidated to satisfy the claims of its creditors. If the reorganisation is not feasible, or the restructuring plan is not approved, the court may declare the debtor bankrupt. A judicial administrator is appointed to manage the liquidation process, and the proceeds from the sale of assets are distributed among the creditors in accordance with the legal priorities. (Restructuring and insolvency law in Romania | CMS Expert Guides)
Preventive Composition (Concordat preventiv): A preventive restructuring procedure that allows a debtor to negotiate with creditors to reach a composition agreement, aiming to avoid insolvency. This procedure is typically initiated before the debtor becomes insolvent. (Restructuring and insolvency law in Romania | CMS Expert Guides)
📆 Recent Amendments (2023)
In 2023, Romania introduced several amendments to the insolvency framework:
Extension of Restructuring Agreements: Companies that entered into an arrangement with their creditors prior to the modifications introduced by Law No. 216/2022 can request an extension of the term by another 24 months, for a maximum of 60 months. Creditors who voted against the extension have the right to recover their debt through other legal means, including filing for insolvency proceedings. (Insolvency 2023 - Romania | Global Practice Guides | Chambers and Partners)
Insurance Policy Validity: Emergency Ordinance No. 71/2023 extended the validity of insurance/reinsurance policies concluded by insurance companies undergoing insolvency proceedings for a period of 90 days, facilitating the conclusion of new insurance policies by affected customers. (Insolvency 2023 - Romania | Global Practice Guides | Chambers and Partners)
Strengthening Creditors' Rights: The new law allows creditors to become involved in the choice of the court-appointed receiver or liquidator, addressing previous concerns where debtors could impose a receiver convenient to them. Additionally, creditors financing the debtor during insolvency proceedings have enhanced protection, including the option to request immediate liquidation if their claims exceed 40,000 lei and remain unpaid for more than 60 days. (New insolvency and bankruptcy law: More protection for creditors - ECOVIS International)
🧑⚖️ Insolvency Procedures
Voluntary Procedures:
Restructuring Agreement: A confidential and unlimited negotiation between the debtor and creditors, assisted by a restructuring administrator. The agreement must respect the fair treatment of creditors and is subject to approval by the syndic judge. (Insolvency 2023 - Romania | Global Practice Guides | Chambers and Partners)
Arrangement with Creditors: A less formal negotiation procedure allowing a temporary stay of individual enforcement actions against the debtor. The provisions of the law regarding voting and quorum requirements and the fair treatment of creditors are similar to the Restructuring Agreement procedure. (Insolvency 2023 - Romania | Global Practice Guides | Chambers and Partners)
Involuntary Procedures:
Initiation by Creditors: Any creditor holding a receivable higher than 40,000 lei against a company that is unpaid for at least 60 days may request the opening of the insolvency procedure against the company. (Insolvency 2023 - Romania | Global Practice Guides | Chambers and Partners)
Observation Period: An observation period may not exceed one year from the date of initiation of the procedure. During this period, a restructuring plan must be approved. If this does not take place, the liquidation procedure must be initiated against the debtor. (New insolvency and bankruptcy law: More protection for creditors - ECOVIS International)
📌 Key Considerations
Debtor's Obligation: A debtor is obliged to file a claim with the tribunal requesting that it be subject to the insolvency procedure within a maximum of 30 days from the occurrence of insolvency. Insolvency is defined as the point at which insufficient funds are available for the payment of certain, liquid, and payable debts of more than 60 days. (Insolvency 2023 - Romania | Global Practice Guides | Chambers and Partners)
Management Liability: The patrimonial liability of the members of management and/or supervisory bodies of the company, as well as any other persons who contributed to the insolvency of the debtor, may be requested if they have ordered, for their own benefit, the continuation of an activity that clearly led to the company’s cessation of payments. (Insolvency 2023 - Romania | Global Practice Guides | Chambers and Partners)
Court Oversight: Insolvency proceedings are overseen by the court, which appoints a judicial administrator or liquidator to manage the process. The court ensures that the proceedings comply with legal requirements and protects the interests of creditors and other stakeholders.
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