Simplified procedure of the insolvency regulated by the provisions of the Law no. 85/2006, specific modality of entering directly to the bankruptcy procedure

 

The object of the present measure is the simplified procedure of the insolvency, seen as a specific way of guaranteeing the creditors ` rights and the implied recovering of the debtors` receivables, even when it comes to the large amount of these receivables.

 

1. The necessity of a regulation regarding the commercial activity and the insolvency

 

The initial commercial activities had to be submitted to a number of rules, codified later in real commercial codes.

A regulation regarding the commercial activity and, afterwards, the insolvency was imposed by the real need of protecting the creditor against the incapacity of the debtor to face his debts, in order for the trader that loaned capital to have a chance of recovering it, even if the debtor is not able to return the debt.

 

2. The evolution of the regulation regarding the insolvency procedure

The main regulation after the 1989 Revolution was Law no. 64/1995 regarding the judicial reorganization and the bankruptcy. This regulation was suppressed by the provisions of  Law no 85/2006 regarding the insolvency procedure.

By the provisions of Law no. 64/1995, the problem of the necessity of this regulation was partially solved.

There is no doubt that the regulation covered, at that time, most of our commercial activity `s  needs.

But the most unfavorable effects of this regulation consisted in:

(i)    Being centered on the objective of the principle concerning the payment of the trader’s debts, the procedure regulated by Law no. 64/1995 was too complicated, artificially burdened and excessively prolonged in time. 

(ii)  The immediate consequence of the main trait of this procedure was the excessive expenses, sometimes even useless  and  the lack of attributions for the persons involved in it .

(iii) The final effect was the diminution of the payment made directly to the creditor.

 

The most defining trait of the procedure regulated by the provisions of Law no 64/1995 was the unique procedure applied to the persons specified by it.

 

By the provisions of Law no. 85/2006 regarding the insolvency, these drawbacks were supplemented with a new procedure.

 

3. The object of the new procedure regulated by the provisions of the Law no. 85/2006

 

When compared with the former regulation, respectively the provisions of Law no. 64/1995, the new regulation provides that its provisions have as object the establishing of a joint procedure in order to cover the liabilities of an insolvent debtor.

(i)The first observation that requires our attention is that the actual provision does not show the specific ways of covering the liabilities of the insolvent debtor, while the former expressively specified that these ways were either reorganization or liquidation of his patrimony. These ways depend on the patrimonial quality of the insolvent debtor.

The fact that these modalities are not expressively specified does not mean that they are not important or that their importance suffered serious changes. It is necessary to take a careful look at the provisions of the law, in general, in order to see that it regulates the general procedure, the simplified one, the judicial reorganization and the bankruptcy.

It can only mean the  legislator  did not intend to point any supremacy of a procedure towards another; the choice of the modality to cover the liabilities of the insolvent debtor is to the creditor and the judicial administrator, accordingly to the situation, of the debtor’s patrimony.

Covering the liabilities of an insolvent debtor means the payment of all the debts, regardless of the juridical fact that generated them. So, the main purpose of the new regulation consists in covering the liabilities, not in saving the debtor `s patrimony.

(ii) The second observation that should be made about the new regulation concerns the joint character of the procedure. The main consequence of settling this as a principle resides in a lack of supremacy between the creditors.

 

4. The procedures regulated by the provisions of Law no. 85/2006, the general one and the simplified one.

The new legislation provides two major procedures in  order to cover the liabilities of an insolvent debtor: the general procedure and the simplified one.

Through these two procedures, the new element that defines the purpose of the regulation is the simplified procedure.

 

5. The definition of the simplified procedure

The simplified procedure is defined as the procedure provided by the present regulation, by which the debtor that fulfills the conditions regarding the special qualification of the debtor and the special conditions regarding the patrimony enters directly into the bankruptcy procedure, either at the moment of beginning the insolvency procedure, or after an observation period, during which the elements concerning the state and the situation of the patrimony will be analyzed.

 

6. Persons and circumstances that the simplified procedure might be applied to

 The simplified procedure can be applied to the insolvent debtors, such as:

(i) traders, physical persons, acting individually

(ii) family associations

(iii) one of the traders mentioned in the two categories above, fulfilling one of the following conditions regarding the patrimony:

·      there can not be found any asset in their patrimony

·      the statutory or the accountant documents  cannot be reached

·      the administrator cannot be found

·      they have no longer a headquarters or this headquarters is not the same with the one mentioned in the Trade Register

(iv) the following debtors: corporate, cooperative bodies, cooperate bodies, agricultural societies, economical interests groups, any other private body that manages including economical activities, who did not present the following documents: a complete list of all the debtor `s assets (including the accounts and the banks where these accounts are in), a complete list off all the creditors (including the nature of the debt), a list of all current activities that the debtor intends to perform during the observation period, the declaration through which the debtor declares his intention of entering into the simplified procedure, in due time

(v) corporate that have been dissolved before the filling of the beginning request

(vi) debtors who assumed by the beginning request the intention of bankruptcy or who are not entitled to the benefit of the judicial reorganization procedure regulated by the present law.

 

The first observation that can be raised is that, in the conception of the law, the simplified procedure can be applied to the traders – physical persons and family associations being in the situations presented above, but also to the traders that can benefit of the general procedure, having fulfilled the specific conditions provided by the law.

(i) the following traders: corporate, cooperative bodies, cooperate bodies, agricultural societies, economical interests groups, any other private body that manages including economical activities.  

From the legal form of expressing the ideas, it results that not all the entities mentioned in the first paragraph can be submitted to the simplified procedure, but only the ones that are traders. So, the simplified procedure excludes the agricultural enterprises, economical interest groups, that do not have commercial activity.

The first case of incidence of the simplified procedure is the one when there can not be found any asset in the patrimony of the debtor. This circumstance can be proven by any evidence, even by the judicial liquidator report.

The second case of  incidence of the simplified procedure is the one when the statutory documents or the accountant ones cannot be reached. This circumstance can be also pointed by the judicial liquidator or even by the creditors.

The third case is the one when    the administrator cannot be found. Although the text law indicates the singular, the simplified procedure will be incident in the situation implying more administrators. Concerning this case, it is sufficient the fact that there are no longer information about the administrator.

The fourth case regards the circumstance when they no longer have a headquarters or this headquarters is not the same with the one mentioned in the Trade Register. In order to have legal relevance, it is sufficient that at the headquarters mentioned in the Trade Register does not exist any activity.

 

(ii) family associations

Family associations can be organized by the initiative of a physical person and it has as members the members of a family. It is legally represented by the person that had the initiative of organizing it or the person empowered by the association.

The most important observation about this subject of the simplified procedure is that, having the fact that the family association is not a legal entity, it does not have a patrimony. The conclusion is that the simplified procedure will have as object the patrimonies of its members.

 

(iii) traders – physical persons.

According to the provisions of the Commercial Code, in order for a physical person to be considered a trader, it must have the commercial activity of a usual one. There was one additional condition imposed by the literature, which is that the commercial activity has to be taken on his behalf, in order to separate the traders from the others he uses in his activity.

The logical consequence is that, in order for a physical person trader to be submitted to the simplified procedure, it has to be proven that he has commercial activity. Having being registered to the Trade Register is not sufficient, it has to be completed with other evidences, because the registration at the Trade Register is a condition to have a commercial activity, but not to become a trader.

 

 

(iv) debtors mentioned at point i), who did not present the following documents: a complete list of all debtor `s assets (including the accounts and the banks where these accounts are in), a complete list off all the creditors (including the nature of the debt), a list of all current activities that the debtor intends to perform during the observation period, the declaration through which the debtor declares his intention of entering into the simplified procedure, in due time.

It concerns the complete list of all the debtor ` s assets, names and addresses of all debtors, the current activities intended to take course during the procedure and the declaration with the reorganization intention or the appliance of the simplified procedure of the debtor.

 

(v) corporate that have been dissolved before the filling of the beginning request and the wayward procedure did not conduct to a satisfactory fulfilling of the creditors` rights.

(vi) debtors who assumed by the beginning request the intention of bankruptcy or who are not entitled to the benefit of the judicial reorganization procedure regulated by the present law.

The debtor can attach to his request the declaration which comprises the intention of becoming a subject of the simplified procedure.

Another situation concerns the case when the debtor does not submit the declaration which comprises his intention about the procedure that should be applied, the law presuming that he agrees the simplified procedure.

 

7. Consequences of the simplified procedure

According to the provisions of Law no. 85/2006, entering into the simplified procedure produces the following effects:

·      The judge will nominate directly a liquidator. It means that the simplified procedure does not involve a judicial administrator.

·      If the judge finds the request for the simplified procedure admissible, it will pronounce a minute of entering into the simplified procedure. If the debtor does not express the choice for a specific procedure within 10 days from the moment of the filling the request, the simplified procedure is presumed accepted by the debtor.

·      The liquidator will take a careful examination of the debtor `s activity, consequently to the drafting of a complete report on the causes that led to the insolvency, mentioning the persons responsible. This report will be submitted to the judge.

·      The liquidator will also manage the debtor ` s activity, including filling requests in order to get the annulment of the fraudulent contracts concluded by the debtor, by whom the legal rights of the creditors are injured.  

·      It is possible that, once the general procedure was started, the judicial administrator points to the judge the necessity of the simplified procedure. The judge will submit the judicial administrator ` s proposal to all parties involved. This proposal shall be either admitted or rejected by the judge. If the simplified procedure is accepted, by the same decision, the judge will dispose the entering into the bankruptcy.

·      The terms in the simplified procedure are smaller that the ones in the general one. This is a direct consequence of the celerity of this procedure.

·      The liquidator will notify this circumstance to all the creditors and the trade register and all other institution authorized to proceed to the mention.

·      After liquidating all the debtor `s assets, the liquidator will proceed to a final report addressed to the judge, having attached the financial situations. After getting the judge ` s approval on this report, the liquidator will distribute the amounts to the creditors.

 

From the short description of the simplified procedure as above presented, it appears as a faster procedure regulated in order to ease the recovery of the receivables by the creditors. It also results that the simplified procedure applies to specific cases specified by the law.

 

The existence of a simplified procedure appears, in fact, as a guarantee for the creditor, in order to expedite the recovery of the receivable and to diminish his losses. It also appears as a protection given to the creditor and to the commercial activity in general.