Poland is set to introduce major permanent amendments to its national restructuring and bankruptcy law, and launch the National Register of Debtors and an IT platform for handling insolvency proceedings, from 1 December.

Debtwire spoke about the upcoming changes to Karol Czepukojć, co-head of restructuring & insolvency in Poland and member of the EMEA restructuring & insolvency steering committee at Baker McKenzie, and Wojciech Barański, head of the bankruptcy and restructuring team at DeBenedetti Majewski Szcześniak (DMS).

Simplified restructuring procedure (or new Polish Scheme of Arrangement)

From 1 December 2021, the new amendments to the restructuring law will effectively make simplified restructuring proceedings, introduced in June 2020 as part of new supportive measures during the COVID-19 pandemic, permanent, with some modifications.

The temporary COVID-19 legislation was initially effective until June 2021, but was subsequently extended until 30 November 2021.

The simplified restructuring procedure has been extremely popular in Poland, and it now constitutes approximately 80% of all restructuring proceedings, according to Wojciech Barański.

“Why is it so popular? Because of minimum formalities. The entire restructuring procedure takes place without the court’s control. The court steps in to check the compliance of the composition with the provisions of law at the very last stage of the procedure,” Barański said.

Karol Czepukojć compared the new procedure to the English Scheme of Arrangement, but renamed “the New Polish Scheme,” as in a similar manner it largely takes place out-of-court and is available to debtors on the brink of insolvency. Although, in contrast to the English Scheme, there is an option for a moratorium period and protection from creditors, which is a great advantage for debtors, he noted.

To initiate a procedure, a debtor has to select a restructuring specialist to appoint as a supervisor of the restructuring arrangement, determine an arrangement date, draft together a list of recognised and disputed claims and come up with an initial restructuring plan. At a later stage, a final restructuring plan and a proposal for the restructuring arrangement must also be drafted.

The supervisor can additionally make a voluntary announcement on commencement of the restructuring in the National Register of Debtors, which gives the debtor at least four months of protection against claim enforcements and asset seizures, including the freezing of bank accounts. During this period, the debtor must arrange a creditor vote on the restructuring arrangement and file for the court’s approval.

“During this four month period, the debtor will generally enjoy a moratorium from an individual bailiff's enforcement actions taken by both non-secured and secured creditors. Moreover, the publication will also trigger a restriction in favour of the debtor on the admissibility of terminating, among others, agreements concerning real estate leases and rentals, credits, leasing, property insurance, bank accounts, surety, as well as agreements covering licences granted to the debtor and guarantees or letters of credit,” Czepukojć noted.

The Polish Scheme allows the debtor to continue trading, remain in possession and manage all its assets, although the supervisor will oversee its operations and update creditors on its financial situation and prospects for executing the restructuring arrangement. Moreover, if the debtor enjoys the moratorium and protection, the supervisor’s consent will be necessary for the debtor to engage in activities exceeding the ordinary course of business (eg. a sale of essential assets), Czepukojć continued.

Under the Polish Scheme, restructuring terms shall be the same for all creditors, unless the voting on the arrangement is carried out in separate creditor groups, when the same terms should apply to all creditors within a given group (with the exception of a creditor explicitly agreeing to less favourable conditions), Czepukojć went on to say.

“A type of cross-class cram-down mechanism will be applicable. Once voting on the restructuring arrangement has taken place and the required number of creditors has agreed to its applicability, the arrangement is binding on all, even if they voted against it or chose not to vote," he added.

"Importantly, according to the Polish Scheme, the debtor may also force secured creditors to be bound by the restructuring arrangement, in the case the arrangement proposal provides full satisfaction of the secured creditor or at a degree not less than the expected satisfaction from the enforcement of collateral. This mechanism will be accessible to the debtor from 1 December in any type of court restructuring opened in Poland.”

Although the simplified procedure proved to be very popular, Barański warned that it might offer too much freedom to debtors and it is yet to be tested for its long-term efficiency.

“In my opinion, this is a rather one-sided perception – mostly from the perspective of the debtor,” he said. “I do not say that a fast and de-formalised restructuring procedure is not necessary, though the changes with regards to the privileges offered to debtors are too far reaching, I believe. The debtor has four months of complete freedom as regards to the use of its assets and none of the creditors are allowed to size the assets or commence enforcement. The debtor may freely use its assets, while the control performed by a selected restructuring advisor is far too little.”

The National Register of Debtors and IT platform

The new National Register of Debtors (Krajowy Rejestr Zadłużonych) will also be launched on 1 December.

The Register will be publicly accessible online and include information on the identity of debtors, which are or were subject to the court restructuring and bankruptcy or unsuccessful bailiff’s enforcement, among others. The Register will also provide access to insolvency-related information regarding submitted insolvency applications, open insolvency proceedings and on the course of ongoing court restructurings and bankruptcies, according to Czepukojć.

At the same time, a new IT platform for handling insolvency proceedings will be launched. The platform will be used, among others, for issuing court orders, submitting pleadings, delivering court correspondence and handling files in court restructuring and bankruptcy proceedings.

Barański welcomed the ease of access to information as a very positive and long-awaited development.

“This is a fundamental change since up to now a creditor often learned that its debtor has gone bankrupt at the moment the bankruptcy was announced, in the best-case scenario, or even when the enforcement has started against the debtor,” he said.

Until now, all announcements on bankruptcy or on the opening of restructuring proceedings as well as the most important decisions in those proceedings were made in Monitor Sądowy i Gospodarczy/MSiG (an official Commercial and Court Gazette in Poland), Barański noted, adding that it would require going through hundreds of announcements every week or calling a court trustee to get updates on restructuring proceedings.

“[With the new Register] creditors will be able to verify whether their contracting party has filed for bankruptcy or restructuring, at what stage the proceedings are and what are the chances to have their claims satisfied, how many creditors are involved and what is the overall sum of the reported claims,” he continued.

"The new provisions will make it easier, or even force the undertaking of actions in the bankruptcy or restructuring procedure in an electronic way," the DMS partner noted. Creditors, for instance, will be able to submit their claims electronically, therefore significantly speeding up the consideration of the case.

"The launch of the Register and the IT system will be a revolutionary, long-awaited change that should be positively felt by all insolvency practitioners, stakeholders of insolvency proceedings and courts in Poland," Czepukojć concluded.

Implementation of the EU Directive on restructuring and insolvency

Further amendments to the Polish Restructuring and Bankruptcy Laws are expected in 2022.

Poland, as an EU Member State, was obliged by 17 July 2021 to implement Directive (EU) 2019/1023 on restructuring and insolvency.

One of the main purposes of the Directive is to reduce the differences between Member States regarding the range of procedures available to debtors in financial difficulties, according to Czepukojć.

The Directive, however, is yet to be implemented into Polish domestic law, as the country benefited from the option to extend the implementation period for one year, up until 17 July 2022, Czepukojć added.

by Alesia Sidliarevich

Alesia Sidliarevich Associate Editor, CEEMEA Debtwire

Alesia Sidliarevich is an Associate Editor at Debtwire CEEMEA, where she focuses on debt restructuring situations. She has been with Debtwire since 2008, initially joining the publication as a CEE-focused debt capital markets reporter. Alesia has a vast experience in covering bonds and loans primary markets as well as distressed situations and debt restructurings, with articles syndicated in The Financial Times and Forbes. Alesia also worked as a newspaper reporter during her student years in Belarus, a country where she was born and grew up. 

Based in London, Alesia holds two Master's degrees: the MA in History from Central European University and the MA in Journalist from Erasmus Mundus Programme. She is a thrillseeker and enjoys adrenaline driven outdoor sports, such as kitesurfing, rock climbing and lately mountain biking.