THE UPDATED BANKRUPTCY CODE: A SECOND CHANCE FOR BUSINESSES GOING BANKRUPT DUE TO GENUINE INABILITY, DECEMBER 2016
The Law No. 4446/2016, published in the Official Gazette of the Greek Government of the 22 December 2016 (Governmental Gazette Vol Α’ 240/22.12.2016), makes amendments to the current Bankruptcy Code through which businesses going bankrupt due to a genuine inability to pay (defaulted debtors) are provided with a “second chance” regarding their future operation. The law envisages the insolvency proceedings to move fast for businesses considered to be viable, so they can rapidly enter into rescue mechanisms. Nevertheless, the Law also provides that businesses uncappable of being rescued will still be given a short period of time to terminate any pending matters, so as to avert bankrupts from a long-term ‘captivity’.
In particular, on the premise of the above-mentioned regulations, businesses going bankrupt shall be given a ‘second chance’, as long as they are genuinely unable to serve their overdue debts. The regulations even state that in case a business operates in good faith when bankruptcy has been declared, it is apparent that bankruptcy cannot be attributed to any fraudulent activities and that the business remains cooperative and ensures the submission of the relevant application. Furthermore, it is possible for such businesses to achieve an acquittal within the next two years, entirely relieving them from any residual debts they may have, which cannot be satisfied through the bankruptcy estate. Therefore, debtors for whom Justice has ruled that they did not go bankrupt fraudulently, shall have within the next two years the opportunity to recommence their commercial activity.
For the consolidation agreement to be validated, it necessarily has to be concluded between the debtor and creditors representing 60% of the total claiming debts which include 40% of claiming debts guaranteed by a preferential ranking, security or mortgage. But even if the agreement is concluded only by creditors, without the debtor’s joint action, it remains valid under the condition that the debtor is in a position of cessation of payments.
The debtor’s consent is a sufficient but not necessary condition for the consolidation agreement to be implemented. The objective is to prevent non-cooperative debtors from impeding the consolidation plans and procedures which can actually run without their consent. However, this only applies in cases where debtors are in a position of cessation of payments and they do not adopt last minute measures to avoid bankruptcy.
Additionally, criminal sanctions shall be imposed on non-cooperative debtors who do not furnish the necessary evidence allowing sustainability assessments of their businesses in court, in order to legitimize the cessation of payments.
According to the provisions of the revised Bankruptcy Code, debtors are eligible to submit a bankruptcy petition, provided that they present all financial statements and certificates of government-held debts, so that the court can thoroughly scrutinize the case on the substance.
The revised Bankruptcy Code also provides for “fast track” procedures. The opening of any consolidation procedures will be abolished for the purpose of generally accelerating the process, which was proved to be often misused by a number of debtors in their effort to be granted indemnity towards their creditors while at the same time the ability to reorganize the business through the bankruptcy process shall remain. Moreover, the period of time the court requires to examine and complete a consolidation plan and petition will be reduced, since the debtor will have the opportunity either to submit a business consolidation plan when submitting his petition concurrently or within the next three days.
Full text of the Law No. 4446/2016 is published on the Ministry of Justice Transparency and Human Rights webpage: http://www.ministryofjus Transparency and Human Rights tice.gr/site/Portals/0/uploaded_files/uploaded_23/n_4446.pdf.
Sources: Ministry of Justice Transparency and Human Rights
•For the first time, it is provided that a fee between 20 – 50 € must be payed as a condition for the postponement of any civil or administrative trial to be granted, depending on the type of court.
•The amount of Court Buildings Fund stamps is slightly increased in the majority of cases.
In more detail, any changes the Law No. 4446/2016 envisages with regard to court fees and relevant costs, can be found at the announcement the Athens Bar Association has published on its website (www.dsa.gr).
