Is your company in bankruptcy, or is it facing bankruptcy? Have you lost a key customer for your goods or services, causing your assets to plummet and your liabilities to skyrocket? Are you more interested in turning your company around than in letting it go under? Restructuring is one possible way to resolve your situation. You can learn more about restructuring, its nature, and the process in this article.
Restructuring is a legally regulated process aimed at turning around a business that is at risk of bankruptcy or is already in bankruptcy. Restructuring represents a less drastic way to satisfy creditors’ claims compared to bankruptcy, as the primary purpose of restructuring is to rehabilitate the company, not to immediately liquidate its assets as is the case in bankruptcy. Restructuring is therefore an alternative to bankruptcy proceedings; however, unlike bankruptcy—which is a purely liquidation process—restructuring has a rescue and recovery (rather than liquidation) character. Its basic legal framework is set forth in Act No. 7/2005 Coll. on Bankruptcy and Restructuring and on Amendments to Certain Acts.
Restructuring proceedings are proceedings initiated by a petition; thus, the pivotal moment for the very commencement of restructuring is the filing of a petition for authorization of restructuring with the competent court. It follows from the above that the court does not initiate restructuring proceedings on its own initiative. In addition to the petition for authorization of restructuring, which may be filed by both the debtor and the creditor, the restructuring report is also important; together with the petition for authorization of restructuring, they form the fundamental pillars of the restructuring. Only an administrator registered in the List of Bankruptcy Administrators maintained by the Ministry of Justice of the Slovak Republic is authorized to prepare the restructuring report. In the restructuring report, the administrator recommends, based on an objective assessment of the individual facts, whether or not to approve the restructuring.
Restructuring most often consists of 6 phases, specifically:
- Commencement of restructuring proceedings
- Approval of restructuring
- Filing and verification of claims
- Preparation of the restructuring plan and its subsequent approval by the approval meeting and the creditors’ committee
- Confirmation or rejection of the restructuring plan by the court
- Completion of the restructuring.
For the actual initiation of restructuring proceedings, as well as for the court’s approval of the restructuring, it is essential that the petition for approval of restructuring contain, in addition to the general requirements for a petition under the Civil Procedure Code, other requirements stipulated by the Bankruptcy and Restructuring Act (e.g., the petitioner’s certified signature,
the debtor’s consent to the filing of the petition if the petitioner is a creditor, etc.). The petitioner must also attach the documents required by law to the petition (the restructuring opinion is one of them). This is necessary to ensure that the petition for authorization of restructuring is not rejected by the court on the grounds that it contains errors or is incomplete, as the court does not request the petitioner to correct or supplement the petition. The court will decide on the application for restructuring approval within 15 days of its receipt.
The advantages of restructuring are:
- suspension of the enforcement of a lien;
- the inability to initiate enforcement or proceedings for the enforcement of a decision;
- suspension of enforcement or proceedings for the enforcement of a decision that have already begun;
- suspension of bankruptcy or auction proceedings;
- invalidity of contractual provisions under which the other contracting party (other than the debtor) is entitled to terminate or withdraw from the contract;
- the possibility of the business continuing to operate.
The information provided above is merely an example of what our law firm offers its clients as part of our legal advisory services in the area of restructuring. Our law firm has many years of experience in both restructuring and bankruptcy proceedings. We represent our clients throughout the entire restructuring process, from the preparation of documents, through regular updates on the status of the restructuring, to its completion. We provide our clients with comprehensive legal, economic, and tax advice, as evidenced by our law firm’s long-standing collaboration with the renowned tax advisor Ing. Mgr. Martin Tužinský, PhD. Our law firm also collaborates with several bankruptcy trustees and restructuring administrators who prepare restructuring reports for our clients. Our goal is therefore to provide clients with comprehensive advice in the areas of both restructuring and bankruptcy.
