- Access to finance
- Rescue procedures in case of insolvency
Προπτωχευτική διαδικασία εξυγίανσης, άρθρα 99-106 Πτωχευτικού Κώδικα.
Pre-bankruptcy rehabilitation procedure, articles 99-106 of the bankruptcy code
Commercial businesses operating in Greece which are currently (or risk being) unable to fulfil their outstanding financial obligations.
Articles 99-106 of the bankruptcy code provide for and regulate a rehabilitation procedure for commercial businesses operating in Greece which are currently (or risk being) unable to fulfil their outstanding financial obligations. The rehabilitation procedure takes place before bankruptcy is declared by the court and aims to preserve, develop, restructure and reform the business through the signing and ratification of a rehabilitation agreement. In short, the business draws up a rehabilitation plan and then submits it for ratification to the competent court, called the bankruptcy court, on condition that a minimum number of the business’s creditors have endorsed the plan. Agreement between the business and the creditors can be arrived at either extra-judicially, i.e. before the application for ratification of the rehabilitation plan is made to the court, or judicially, i.e. with the mediation of the bankruptcy court.
Under the extra-judicial rehabilitation procedure, the debtor, i.e. the business, takes the initiative and makes contact with its creditors for the purpose of concluding a rehabilitation agreement. For the agreement to be valid, it must be signed by creditors representing 60% of overall claims, including 40% of any claims secured either by special privilege or by mortgage prenotation. The percentage of contracting creditors is calculated on the basis of a list of creditors which must be attached to the rehabilitation agreement and must bear a date no more than three months prior to the date on which the application for agreement was submitted to the court for ratification. The agreement is then submitted to the bankruptcy court for ratification.
If no extra-judicial agreement is arrived at in respect of the rehabilitation plan, then the law provides for an attempt to reach an agreement through the courts. The procedure is as follows: the business facing bankruptcy draws up a rehabilitation plan and submits it to the bankruptcy court. If the bankruptcy court deems that the requirements of the law have been met, it opens the rehabilitation procedure, which may last up to three months. In tandem with the opening of the rehabilitation procedure, the bankruptcy court may also order the suspension of enforcement proceedings against the business’s property and prevent the sale of the business’s immovable property and equipment. At the same time as the decision to open the rehabilitation procedure, the bankruptcy court convenes an assembly of creditors whose claims existed on the date that the procedure began. Under the law, the invitation must be made at least 15 days before the date of the assembly, while the draft rehabilitation agreement and the expert report must be made available to the creditors at least ten days before the date of the assembly. Creditors whose claims are affected by the rehabilitation plan but are not reduced to zero are assumed to have voted in favour of the plan in the case of their abstaining from voting. For the resolution of the assembly to be valid, creditors representing 50% of all claims must be in attendance or represented. For the draft rehabilitation agreement to be accepted, a majority of creditors representing 60% of the claims of creditors present at the assembly is required, including 40% of the claims of creditors present at the assembly which are secured either by special privilege or by mortgage prenotation.
The law provides that the state, public entities, public sector enterprises, and social welfare and social security organisations may consent to a rehabilitation agreement being concluded, even when, under the agreement, the public organisation waives its privileges and guarantees, whether in personam or in rem. The Minister of Finance is responsible for the decision, following an opinion from the legal council of state, which is issued on the recommendation of the Ministry of Finance directorate responsible for the collection of state revenues.
- No specific funding required
In recent years, many businesses (and certainly the bigger ones) have sought to follow the procedure under article 99. By observing the most famous recent cases, it seems that this procedure cannot save from closure enterprises which are severely hit by the huge economic and political crisis of the last seven years. However, it is a tool to which the enterprises, at least the bigger ones, almost certainly turn to, as a last refuge, before applying for bankruptcy. Thus, it seems that the pre-bankruptcy rehabilitation procedure is a very useful tool for the enterprises, but on the one hand it should be further be reformed in order to be more effective, on the other hand enterprises need further support instruments to be provided, in order to be viable in the context of the severe crisis that the Greek economy is facing.
The economic crisis of the last seven years has put the business world to the test, with the result that most businesses have difficulty seeking out financial resources. The above provisions, which provide for a pre-bankruptcy rehabilitation procedure, are new and constitute a relatively recent reform of bankruptcy law (in 2012) with the purpose of improving the viability of businesses so that they can cope with the economic crisis. Its supporters argue that as a means of preventing bankruptcy, the rehabilitation procedure described above is an important innovation and a significant attempt to rescue businesses. In comparison to the previous system, the new provisions are seen as facilitating rehabilitation because:
- it enables the rehabilitation procedure to be implemented in the case of businesses that have already entered the stage of stopping payments, whereas under the previous law, once payments had ceased there was no possibility of rehabilitation; and
- it is binding on those who did not agree to the rehabilitation agreement, which facilitates rehabilitation, whereas under the previous system, the rehabilitation plan was only binding on those creditors that had signed up to it. In these ways, the possibility of rehabilitation is greater than in the past.
The system of rehabilitation described above has come under fire from critics for not being well-planned, for lacking innovation and for being a half-hearted attempt to reform the previous system. The reform of bankruptcy law has also been criticised as a whole for reducing the protection of employees in comparison with the past. Under the previous system, all employee claims from the two years prior to the bankruptcy and claims for compensation for termination of a contract were satisfied first. Under the new law, preferential employee claims are limited to six months prior to the bankruptcy. At the same time, interest on those claims is excluded from the preferential ranking and, finally, the amount that employees can claim is no more than half the distributable capital. The privileges of the public sector and social security funds are similarly curtailed.