The Government adopted on Thursday the draft Emergency Ordinance for amending and supplementing legislation in the field of insolvency, which provides among other things for the transformation of budgetary receivables into shares.
Business people could get rid of the public-law liabilities of the companies they control as the draft gives the state the possibility to convert debt into shares in that company.
At the same time, the ordinance hinders the starting of the insolvency procedure in companies with public-law liabilities of over 50%.
Insolvency practitioners have criticized the draft prepared by the Government and have advanced several amendment proposals. The Finance Minister recently accused the Minister of Justice of delaying the Government’s approval on this draft.
„ANAF will have a clear procedure so that when the law says it has to do certain things, it needs to justify very clearly the two variants. When it takes a decision, to ask for a company’s bankruptcy, it would need to explain why it does that when it does not apply a measure, why it does not apply it, why it proposes a debt to equity swap, and what economic reason exists, and so on. The primary legal framework is covered. At a working procedure level within ANAF, things will be very clear,” Minister Eugen Teodorovici said at the end of the meeting.
Main provisions:
- „The reorganization plan may only provide for the conversion of budgetary receivables into shares if the following conditions are cumulatively met:
- It should results from the content of the reorganization plan, based on the economic-financial analysis, that the debtor company can continue its activity and the proposed measure is viable for society;
- it should result from the content of the reorganization plan that the settlement of claims leads to maximizing the recovery of the state’s claim, as compared to the situation of the debtor’s bankruptcy;
- the conversion should be integral and applied at the value of the budgetary claim, and cannot be cumulated with the measure of reducing the budgetary claim.
- The budgetary creditor may approve the reorganization plan which contains the proposal for reducing the unguaranteed budgetary claim, a reduction substantiated by the insolvency administrator within the plan if the following criteria are met:
- a) the reduction measure is the optimal way of recovering the unguaranteed budgetary claim as compared to the debtor’s bankruptcy;
- b) the debtor owns a trading fund that enables it to continue its activity;
- c) the reduction measure leads to the viability of the debtor company;
- If the insolvency administrator proposes in the reorganization plan the measure of reducing the unguaranteed budgetary claim by up to 50%, the budgetary creditor approves the plan if the criteria set out in par. (51) and at least one of the following are cumulatively met:
- a) at least 50% of the current tax liabilities due during the implementation of the reorganization plan should result, compared to their average annual level prior to the insolvency;
- b) the debtor company must carry out an activity of public interest;
- c) the debtor company must carry out a strategic activity in a particular economic field.
„Changes of the legislation are meant to stop some abusive practices, such as repeated insolvency, in order to elude the payment of obligations to partners and the state budget,” Viorica Dancila said at the opening of the Government meeting.
The Prime Minister has justified that over 28,600 taxpayers are subject to the insolvency legislation.
„Under these circumstances, we come up with a set of regulations that make the insolvency procedure more efficient. We are considering both providing conditions for the recovery of viable companies and protecting the public money by recovering budgetary receivables,” the Prime Minister also said.
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