Restructuring and bankruptcy proceedings
Running a business requires making decisions that may have consequences over the next years or even decades. It happens all too often that a long-term vision or economic objective is confronted with unexpected economic events, in particular ones that affect the enterprise’s financial liquidity and ability to repay its obligations. Each new financial problem can cause the snowball effect, with its scale becoming apparent through the debt amount and number of creditors. This in turn may lead the entrepreneur to consider abandoning the economic objective or even, in the worst-case scenario, filing for bankruptcy. A remedy for these difficulties is provided by certain legal tools found in the area of law known as restructuring law.
Skilful application of the provisions of the restructuring law allows the company or partnership to smoothly get out of its financial problems and continue to pursue the economic objective. An enterprise going bankrupt is an undesirable development from the point of view of both the debtor and the creditor, whose claim can only be satisfied after the completion of bankruptcy proceedings, which entails a time-consuming process of monetising the debtor’s assets. Finally, the bankruptcy of an enterprise affects the state of the economy in a global perspective, which is why the national legislator seeks to reduce the number of bankruptcies and insolvent debtors by introducing legal constructions aimed at restructuring companies and partnerships. In addition, according to the restructuring objective as formulated in the Act, the restructuring process should be carried out with in a way that respects the interests of creditors.
By ensuring effective institution of restructuring proceedings, the debtor can obtain protection from enforcement against their assets. At the same time, the other interested party, namely the creditor, can rest assured as far as the manner and possibility of repayment of the debt is concerned. Moreover, the creditor is given control over the actions of the debtor, whose power to manage their assets is thus restricted. The implementation and successful completion of enterprise restructuring proceedings is always based on reaching a consensus with the creditors; therefore, the debtor should act with initiative at the stage of examining the legal and economic standing of the enterprise, when presenting composition proposals to the creditors, and finally when implementing the composition scheme approved by the creditors.
As part of their practice in the field of restructuring law, our lawyers provide advice on:
The institution of bankruptcy proceedings is one of the ways to bring the legal existence of an enterprise to a close. Depending on whether the petition for bankruptcy is upheld or dismissed by the court, the debtor may choose one of several ways to close their business and remove it from the relevant registers. As a result of bankruptcy proceedings, the debtor is deprived of the right to manage their assets so that those assets can be liquidated to satisfy the creditors. The moment of declaring bankruptcy remains important for the situation of the debtor and the debtor’s management staff as it may be relevant for the future personal liability of the debtor’s shareholders or members of the management board. From the creditor’s point of view, this changes the way of recovering their claims.
EMPIRIUM provides advice on the following matters in the area of bankruptcy law:
Indebted natural persons are now given the option to use a legal tool that will help them get a new start in life in the course of personal bankruptcy proceedings. The need to free natural persons from debt comes not only as a result of social or humanitarian considerations, but is also justified by business and economic reasons. A successful debt relief process where the debtor is a natural person and the creditor’s interests are taken into account is beneficial for all economic actors, such as banks, financial institutions, sellers of goods and services. With the newly recovered solvency, the consumer, now free of debt, can once again become the client of those entities and make purchases thanks to external funds obtained by means of a loan or leasing. Last but not least, an increased volume of purchases on the market is the driving force for the growth of the gross domestic product, which is why the introduction of the mechanism of personal bankruptcy to the legal system and its use are in line with the policies of the countries considered the world’s largest economies.
EMPIRIUM advises individuals eligible for personal bankruptcy on the following matters: