GEO regarding financial crisis and insolvency of administrative-territorial units

In the Official Gazette of Romania, part. I, no. 299 on 24 May 2013 was published Government Emergency Ordinance no. 46/2013 regarding financial crisis and insolvency of administrative-territorial units.

Emergency Ordinance establishes the general frame and collective procedures for covering liabilities of administrative-territorial units which are in a financial crisis or insolvency.

Financial crisis

The normative act defines financial crisis as a state of administrative-territorial unit characterized by the existence of financial issues, a severe shortage of liquidities,  which leads to payment obligations unpaid, liquid and exigible over a certain period of time. The financial crisis is presumed in the following circumstances:

– Non-payment of obligations, liquid and exigible, older than 90 days and exceeding 15% of the general budget of administrative-territorial units, except those in a commercial litigation.

– Non-payment of wages stipulated in the local budget of revenues and expanditure or budgets of public institutions or public services of local interest, for a period exceeding 90 days from the due date.

The situation of financial crisis can be seized according to provisions of art. 74 alin. (2) of Law no.273/2006 regarding  local public finances.

Deliberative authority notes by adopting a decision the existence of financial crisis, empowers the main credit release authority to draft a financial recovery plan and analyzes preliminary strategic proposals to be included in the recovery financial plan developed by the main credit release authority.

The main credit release authority requests registration of  decision deliberative authority for declaring the financial crisis, within 5 working days of its adoption, in the local register of financial crisis situations of administrative-territorial units, which is managed by the General Authorities of Public Finances of Bucharest.

After the decision where was declared a state of financial crisis, it is established the committee for financial crisis, by order of the prefect.

Main credit release authority along with other members of the committee for financial crisis elaborate a financial recovery plan  of administrative-territorial unit, with chamber of accounts opinion.

The financial recovery plan includes, inter alia, measures to ensure  providing of essential public services by local authorities, measures to improve the financial management, of increasing revenues collection and generation of additional incomes, measure to reduce costs. The financial recovery plan can be changed whenever is necessary, in the event at the time of approval it appears any data, informations, or unknown facts .

The situation of financial crisis stops by adopting a decision at the request of the main credit release authority with the advisory opinion of the Committe for financial crisis. Financial crisis stops if:

– Criterion of non-payment obligations or salary rights have not been revealed for 180 calendaristic days.

– If are met criterion for declaring insolvency , stipulated by art. 75 paragraph 1 of Law no. 273/2006, in which case the administrative-territorial unit is subject to insolvency proceedings.


Insolvency procedure, similar to companies, it opens on a petition introduced in court by the creditors or the main credit release authority .

According to provisions of art. 75 paragraph 1 of Law no. 273/2006, administrative-territorial unit is considered insolvent if they are in one of the following situations:

– Non-payment of obligations, liquid and exigible, older than 120 days and exceeding 50% of the annual budget, without taking into account those in commercial litigation;

– Non-payment of wages stipulated in budget of income and expenditure for a period exceeding 120 days from the due date.

The following are competent  to apply the insolvency procedure: the main credit release authority, deliberative authorities, courts, syndic judge, the assembly of creditors, the creditors committee and receiver.

By the decision of opening procedure, the syndic judge appoints a receiver and set tasks for him.

Since the initiation of the proceeding is suspended all judicial or extrajudicial actions for achieving debts of administrative-territorial unit.

Following the initiation of insolvency proceeding, the official receiver shall notify all creditors mentioned in the list submitted by the administrative-territorial unit in insolvency, by the main credit release authority in order to submit applications for admission of claims.

The official receiver elaborates and registers in court a preliminary chart including all claims and  indicating whether they are: unsecured, secured, with priorities or conditional and showing each creditor’s name, the amount claimed by creditor and the amount accepted by the official receiver and the due date.

After all appeals of claims submitted in preliminary chart was resolved, the official receiver records and displays the final table of all claims of administrative-territorial units, showing the amount, priority and status of each debt secured or unsecured.

The official receiver, together with the main credit release authority, prepare a recovery plan which will include resources and deadlines for liquidation of each creditor, included in the plan for paying debts to creditor.

The recovery plan is subject to approval of the general  authority of county public finances or General Authority of Public Finances of Bucharest  and chamber of territorial accounts, and will be subject to approval deliberative authority.

The official receiver negotiates with creditors application of debt payment plan, within which are presented the negociated schedule and repayment conditions.

The recovery plan may disadvantage some claims, can be extended due dates and may be changed the interest rate, penalties or any other terms of the contract or of other sources of administrative-territorial obligations.

For decisions regarding recovery plan to be valid, is required majority vote of creditors representing at least 2/3 of the value of claims.

The syndic judge convenes a meeting within 20 days from the registration of the recovery plan to the court, the plan is accepted, in original form of modified, or rejected by the syndic judge, after hearing the persons quoted. In case the plan is rejected, the syndic judge grant a new term for its restoration.

Implementation of the recovery plan can not least more than 3 year starting from the date of admission.

The syndic judge organizes liquidation proceeding of assets owned by the administrative-territorial unit, as provided in the recovery plan.

In case not all conditions of insolvency of the administrative-territorial unit are fulfilled, the syndic judge rule a decision of closing the procedure, even if  not all claims contained in recovery plan was satisfied. Remaining unsatisfied claims in insolvency proceeding will be included in the recovery plan of the state of financial crisis.


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