InfoCompanies Romania business guide: Judicial reorganizing and bankruptcy

InfoBusiness Romania - online guide

Judicial reorganizing and bankruptcy

• Legal background

The normative act that regulates the procedure necessary for covering the liabilities of insolvent entrepreneurs through either reorganization of the entrepreneur and its activity, the liquidation of certain goods in the patrimony of the same up to the liquidation of the liabilities or through bankruptcy, is Law no. 64/1995 regarding the procedure of judicial reorganization and bankruptcy.

• Conditions for the commencement of the procedure

Entrepreneurs subject to the procedure

The procedure implemented by Law no. 64/1995 applies to any of the following categories of traders that are in a state of obvious inability to pay their due debts with the available cash amounts, i.e. state of insolvency, such as:

-companies;

-consumption cooperatives and handcraft cooperatives, as well as territorial

-associations of the consumption cooperatives and handcraft cooperatives; and

-individuals acting individually or as family associations.

Conditions for demanding the commencement of the procedure

The commencement of the procedure provided for by Law 64/1995 is made pursuant to the admission by the syndic judge appointed by the competent tribunal, of the writ of summons filed by:

-the debtor.

-one of the debtor's creditors.

-the territorial chambers of commerce and industry.

-the territorial or national cooperative associations.

• Debtor

The law obliges the debtor that is in a state of insolvency to submit an application for the commencement of the procedure to the tribunal, within 30 days following the occurrence of the state of insolvency.

In the case of the debtor for whom insolvency is imminent, this debtor shall have the right, but not the obligation, to file said writ of summons.

The premature submission of the writ of summons, as well as the submission in bad faith or with delay by the debtor of an application for the commencement of the procedure, shall result in the patrimonial liability of the debtor who is an individual or of the statutory representatives of the debtor legal entities, for the prejudices caused.

• Creditor

Special administration

Any creditor that has a claim which is certain (the existence of which is doubtless), liquid (which has a definite or at least determinable amount) and due (which has reached the due date and the enforcement of which may be requested) may file with the tribunal an application against a debtor who/which ceased payments, in the following conditions:

- If the claim originates in work relations or civil binding relations, the claim must have an amount higher than the total value of six average salaries per economy, set in accordance with the conditions of the law and calculated on the date of filing of the writ of summons.

- In other cases, the claim must have an amount higher than the ROL equivalent of the amount of EURO5,000, calculated on the date of filing the writ of summons.

- In the case of a creditor that holds claims from both categories listed above, the total amount of the claims must be higher than the total value of six average salaries per economy, set in accordance with the conditions of the law and calculated on the date of filing the writ of summons.

• Territorial chambers of commerce and industry and the territorial/national

The territorial chambers of commerce and industry and the territorial or national cooperative associations, respectively, may file an application against the debtor who, according to their available data, is in a notorious state of insolvency.

• Effects of the commencement of the procedure

On the date of commencement of the procedure, one shall suspend all court or extra-court actions for the achievement of the claims over the debtor or the debtor's assets.

Also, at the same time, the company's administrators are forbidden to assign, without the approval of the syndic judge, their shares or social parts held at the debtor representing the object of the procedure. The syndic judge shall decide upon the blocking of the shares or social parts in the special recording register or the electronically registered accounts.

After the resolution for the commencement of the procedure is deemed final, all documents and correspondence issued by the debtor, administrator or liquidator shall include, obligatorily and in visible fonts, in Romanian, English and French, a mention reading *in state of insolvency*.

Two procedures may be commenced pursuant to the admission of a writ of summons: judicial reorganization and bankruptcy.

Judicial reorganization is decided in the event that after the commencement of the procedure one approved a plan for the reorganization of the debtor's activity in view of the economic recovery of the debtor and the full satisfaction of the creditors' claims.

The debtor subject to reorganization shall continue to exercise the right of administration of its own activity, either alone or under supervision of an administrator.

Through the conclusion deciding on the commencement of bankruptcy procedures, the syndic judge shall pronounce the dissolution of the debtor company and it shall resolve upon the following:

- annulment of the debtor's right of administration;

- appointment of a liquidator, as well as the setting of the liquidator's duties and remuneration of the same;

- the maximum term for the transfer of the administration of the property from the debtor/administrator to the liquidator, together with the list of documents and operations carried out after the commencement of the procedure;

- drafting and delivery to the liquidator, within maximum 10 days following the commencement of the bankruptcy procedure, of a list including the names and the addresses of the creditors and all of the claims thereof as of the date of commencement of the bankruptcy procedure, and pointing the claims that occurred after the commencement of the procedure;

- notification of the bankruptcy.

The syndic judge, through the judicial liquidator, shall also decide upon taking insuring measures and measures for preservation of the debtor's assets to undertake the judicial liquidation.

The entire procedure for the liquidation of the debtor's assets is carried out under the control of the syndic judge who supervises the activity of the judicial liquidator and takes the steps necessary to determine the amounts of the claims, the sale of the debtor's assets and the distribution to the creditors of the amounts resulting from the liquidation.

• Closing of the procedure

The reorganization procedure is closed through a sentence, once all payment obligations assumed in the confirmed schedule have been fulfilled.

The bankruptcy procedure shall be closed when the syndic judge approves the final report, when debtor's all funds and assets were distributed and when the unclaimed funds were deposited with the bank. Pursuant to an application from the liquidator, the syndic judge shall pronounce a sentence, closing the procedure and ordering the annulment of the company, as the case may be.