20 July 2020

Simplified Restructuring Procedure

The fourth and recent amendment to the Anti-Crisis Shield introduced a new instrument for entrepreneurs who have found themselves in a crisis and due to unpaid debts are forced to start restructuring proceedings.

The simplified restructuring procedure (in Poland abbreviated as UPR) allows launching an out-of-court 4-month process which grants protection against the consequences of the company’s insolvency, such as the threat of enforcement or security proceedings.

Starting from June 24th, 2020, new proceedings are available to any entrepreneur, provided that the percent of disputed claims in all of the debtor’s liabilities does not exceed 15%. According to the definition, a claim is disputed when the debtor does not accept its value or legitimacy, or when a court or administrative proceedings are pending against it.

Restructuring advisor

The extrajudicial nature of the UPR requires the signing of a contract with a licensed restructuring advisor – chosen by the entrepreneur himself. The advisor, being the only contracted expert supervising the process, receives special permissions allowing him to control the company’s liabilities, receivables, and financial condition, as well as the details of contracts with contractors.

Simplified restructuring, step by step

Stage 1: Analysis of the entrepreneur’s financial condition with the active participation of an advisor. The duration of the evaluation may vary depending on the company’s size, the number of disputed claims, and contracts. The investigation should result in a joint arrangement proposal, which will then have to be approved by creditors by voting.

The restructuring begins after the debtor publishes an official announcement in Court & Commercial Gazette (Monitor Sądowy i Gospodarczy). List of documents necessary to submit the notice:

• joint arrangement proposal,
• list of claims,
• list of disputed claims.

Stage 2: Start of the proper restructuring procedure as well as negotiations with creditors, which should result in the adoption of the previously prepared arrangement. This stage should last up to four months and should end with approval by the majority of creditors. An important feature that distinguishes UPR from other available options is that the creditors can vote remotely or in a written form (as a means of precaution in the times of pandemic).

The enacted joint arrangement proposal should then be submitted to the restructuring court, which has up to two weeks to approve or reject the application.

Simplified restructuring and the protection of the debtor

For a period of four months (excluding the period for approving the agreement), UPR provides the company with protection against events that may worsen its financial condition and change its situation significantly, such as:

• termination of binding contracts by creditors (a lease of a building or office space, leasing and rental agreements);
• enforcement and bailiff executions, security proceedings.

UPR’s availability

However, please be advised that there are some restrictions. First of all, a given company can only apply for and go through the UPR once. If, after the 4-month period, the joint arrangement proposal will be rejected by the court, the debtor can only use the other remaining options (PPU, PU, ​​PS, PZU).

Secondly, the simplified restructuring procedure is a temporary measure, implemented to help entrepreneurs in the time of the COVID-19 pandemic. It will be available for one year only – from the date of the Anti-Crisis Shield 2.0 coming into force. Thus, entrepreneurs will be able to use the UPR only until June 30th, 2021.