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Amendments to the Insolvency Law

Monitorul Oficial No. 840/10/02/2018 has published the Emergency Ordinance No. 88 / 2018 on the amendment of some normative acts (hereinafter referred to as „GEO88 / 2018”). The regulations introduced by the GEO are also aimed at amending Law no. 85/2014 on insolvency prevention and insolvency proceedings (hereinafter referred to as the ”Insolvency Law„ or the „Law”).

The legislative act seeks to modify the insolvency procedure in order to avoid abusive use of the law by legal entities which, being in this situation, are harming the business environment and tax administration bodies.

Threshold-value
The new definition stipulates that the application for opening of insolvency proceedings, introduced by the debtor, will have to contain a level of budgetary receivables of less than 50% of the total debts declared by the debtor. Also, the tax receivables established by a challenged administrative fiscal document will be admitted on the statement of affairs and entered under condition subsequent until the action is resolved.

– Goodwill
The GEO 88/2018 defines the goodwill as “the entire movable and immovable property, tangible and
intangible – trademarks, firms, logos, patents, good customer used by an economic operator to carry out its business”.

Previous receivable
The law will include within the scope of the term the budgetary receivables established by a notice of assessment issued after the opening of the procedure if the taxed activity was carried out before that moment.

– Special Administrator
The GEO 88/2018 forbids the appointment of a natural or legal person who is also a creditor of a
company in insolvency.

– Official Receiver
The GEO 88/2018 introduces a new obligation to include in the monthly report to be submitted to the case file information on the compliance with tax obligations, regarding the obtaining or necessity of updating the authorizations and permits for carrying out the activity, as well as on the acts concluded by the control bodies that have carried out inspections in that month.

Another change introduced by the GEO 88/2018 in connection with the activity of the official receiver refers to the appointment of the specialists with whom he can cooperate during the course of insolvency proceedings. Thus, the official receiver will not be able to appoint persons who are in a contractual relationship or in an affiliation relationship with the official receiver, the judicial liquidator, the debtor in insolvency or with any of the creditors such as lawyers, accountants, valuators or other types of specialized professions.

– Opening insolvency proceedings
The GEO 88/2018 amends the Insolvency Law in the sense that the application for opening the
procedure will also be rejected if it does not contain the proof of notification to the competent tax authority of the parties’ intention, under certain conditions provided by the law.

– Insolvency proceedings
The official receiver will have a 10-day time limit for reviewing payment requests relating to the claims against the debtor, born after the date of the opening of proceedings. The GEO 88/2018 also provides that the aforementioned deadline will also apply to requests made in proceedings initiated before the entry into force of the normative act.

– Reorganization plan
It will be able to provide for the conversion of budgetary receivables into shares, but only if certain conditions laid down by the Insolvency Law are met, including the consent of the budgetary creditor.

– Bankruptcy of a company
The GEO 88/2018 requires the Court a 30-days’ time limit to settle bankruptcy claims for failure to comply with the reorganization plan or for accrual of new debts to creditors in the proceedings. Such a claim may also be filed by the holder of a current, certain, liquid and exigible receivable older than 60 days and settling the claim shall be made within the same 30-day time limit.

– Patrimonial liability
Regarding the patrimonial liability of the persons guilty of the insolvency of the debtor company, the official receiver or the judicial liquidator will have the obligation to bring an action in this respect in case they identify the guilty persons. The same action may also be brought by the creditor who holds more than 30% of the value of the claims entered on the statement of affairs or by the chairman of the creditors’ committee following the decision of the creditors’ meeting.

The GEO 88/2018 entered into force on the day of its publication, more specifically on 2 October
2018.

Cosmin Ștefănescu
Managing Partner DUNCEA, ŞTEFĂNESCU & ASOCIAȚII

Radu Nicolescu
Managing Associate DUNCEA, ŞTEFĂNESCU & ASOCIAȚII

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