Simplified restructuring proceedings in Poland – new opportunities for entrepreneurs in the COVID-19 era
Polish provisions, referred to as Shield 4.0, officially known as the Act on interest subsidies for bank loans granted to entrepreneurs affected by COVID-19 and on simplified proceedings for approval of an arrangement in connection with the occurrence of COVID-19 (full text available at https://isap.sejm.gov.pl), introduced significant changes to the Polish restructuring procedure. A novelty is the introduction of a simplified restructuring procedure, partly based on the existing regulations on the Polish procedure for approval of an arrangement between the creditors and the debtor. The newly introduced proceedings contain regulations protecting the enterprise against enforcement actions of creditors, while being for the most part extrajudicial (out-of-court) proceedings. An important feature of this new model of debt restructuring, which is also a novelty in the Polish restructuring regulations, is the accompanying extensive enforcement immunity, regulated in Art. 16 sec. 3 of the aforementioned act. As a result, since the announcement on the opening of the simplified restructuring proceedings, creditors in principle do not have the possibility to conduct enforcement proceedings against the entrepreneur – the debtor. According to Art. 17 sec. 1 and 2 of the Shield 4.0, this also applies to claims secured in kind (secured by a physical collateral), which so far was only possible in the costly and lengthy recovery proceedings. Moreover, according to Art. 16 sec. 3 point 3 of this Act, during the period of simplified restructuring proceedings, it is impossible for creditors to terminate major agreements concluded with the debtor, including rental, lease, leasing or credit agreements.
Within the duration of the enforcement immunity, the debtor should first of all prepare arrangement proposals and have them accepted by creditors. The duration of this out-of-court stage of the restructuring procedure is limited to 4 months pursuant to Art. 20 sec. 1 of the Shield 4.0. If the entrepreneur – the debtor fails to reach an agreement with the creditors during this period and no application for approval is filed with the court, the proceedings are discontinued. If the creditors accept the proposed arrangement, the entrepreneur applies to the court for its approval. Obtaining approval of the arrangement by the court successfully ends the entire proceedings. The introduced simplified restructuring procedure in Poland provides new opportunities for both the creditors and the entrepreneurs undergoing restructuring. The effectiveness of the introduced regulations will, however, largely depend on the approach of debtors and their true will to conclude an agreement with creditors.
The discussed Polish regulations on simplified restructuring proceedings are temporary and are only valid until the end of June 2021. However, there are chances that this will change and the simplified restructuring procedure will become a permanent element of the Polish legal order, because the discussed changes are in line with the assumptions of the EU Directive 2019/1023, i.e. the so-called restructuring directive, which Member States are obliged to implement.
