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AmCham Romania Resource Center for COVID-19 Response Business Advisory Insolvency aspects during the State of Alert

Insolvency aspects during the State of Alert

by RTPR | Radu Tărăcilă Pădurari Retevoescu SCA May 21, 2020

Website www.rtpr.ro

Law No. 55/2020 on certain measures for preventing and combatting the effects of the COVID-19 pandemic (the State of Alert Measures Law) was issued on 15 May 2020, for the purpose of continuing to ensure an adequate protection during the state of alert. The State of Alert Measures Law entered into force on 18 May 2020.

The state of alert was implemented for a 30-day period under the Decision No. 24 of 14 May 2020 of the National Committee for Emergency Situations.

The State of Alert Measures Law implements measures and restrictions on various areas, including insolvency, which came as a necessity to the pandemic’s negative impact on the economy, especially on the small and medium enterprises. The statement of reasons of the draft law provides that similar measures have also been implemented by other EU Member States, such as Germany, France, Lithuania or Estonia.

The most important amendments brought by the State of Alert Measures Law to the Law No. 85 of 25 June 2014 regarding pre-insolvency and insolvency proceedings (the Insolvency Law) refer to:

-      During the state of alert, the insolvent debtor has the right, but not the obligation, to file for insolvency; the 30-day term within which the insolvent debtor has a legal obligation to file for insolvency now starts to lapse from the ending date of the state of alert (rather than from the occurrence of the state of insolvency, as provided by the Insolvency Law).

-      In case of an insolvent debtor which partially or fully ceased its activity as a consequence of the measures implemented during the state of emergency/state of alert:

-      The threshold (i.e. the minimum value of claims which triggers the obligation to file for insolvency) was increased from RON 40,000 (approx. EUR 8,300) to RON 50,000 (approx. EUR 10,400).

-      The creditors who wish to file for insolvency must firstly attempt, in a reasonable manner, to negotiate with the insolvent debtor the conclusion of a payment agreement (in Romanian, convenție de plată).

-      Several terms provided by the Insolvency Law were extended, such as:

-  the term for recovering the receivables established under a preventive concordat plan which is being executed at the date when the State of Alert Measures Law enters into force is extended with two months;

-  the observation period (i.e. the period between the date of opening the insolvency proceedings and the date of confirming the reorganisation plan) which is undergoing at the date when the State of Alert Measures Law enters into force is extended with three months; and

-    the period for the implementation of the reorganisation plan which is undergoing at the date when the State of Alert Measures Law enters into force is extended with two months.

In case of insolvent debtors which partially or fully ceased their activity as a consequence of the measures implemented during the state of emergency/state of alert, such period may be further extended, however not exceeding an overall period of five years, or, alternatively, the insolvent debtors may request the insolvency judge to suspend the execution of the reorganisation plan for a period which cannot exceed two months.

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