Restructuring and Insolvency in Romania 2024

Restructuring and Insolvency in Romania 2024 – Romania’s High Court of Cassation and Justice

RESTRUCTURING AND INSOLVENCY 2024

ROMANIA

Dana Buscu, Mihai Popa, Diana Dobromir

(Mușat & Asociaţii)

GENERAL

Legislation

1. What main legislation is applicable to insolvencies and reorganizations?

The main legislation is Law No. 85/2014 on insolvency prevention proceedings and on insolvency procedure transposing Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) 2017/1132 with regard to restructuring and insolvency; and Law No. 151/2015 on insolvency proceedings of natural persons.

Excluded entities and excluded assets

2. What entities are excluded from customary insolvency or reorganization proceedings and what legislation applies to them? What assets are excluded or exempt from claims of creditors?

The general insolvency proceedings stated by Law No. 85/2014 on insolvency prevention proceedings and on insolvency procedure are applicable to all business professionals, as defined by the Romanian Civil Code (ie, anyone who exploits a company), except for those for which special provisions are laid down in respect of the arrangements for the prevention of insolvency and their insolvency.

In the case of the liberal professions, the proceedings provided for in Law No. 85/2014 on insolvency prevention proceedings and on insolvency procedure concern their undertaking and not their professional status.

Where a natural person professional in insolvency has both personal and professional debts that either cannot reasonably be separated or are in divisions of assets set up in accordance with article 2.324 (3) and (4) of Law No. 287/2009 (Civil Code), republished, as amended, they shall be dealt with in the insolvency proceedings provided for by Law No. 85/2014 on insolvency prevention proceedings and on insolvency procedure, to obtain final discharge of obligations.

Other entities excluded from the application of Law No. 85/2014 on insolvency prevention proceedings and on insolvency procedure are units and institutions of pre-university and university education and entities referred to in article 7 of Government Ordinance No. 57/2002 on scientific research and technological development, approved with amendments and additions by Law No. 324/2003, with subsequent amendments and additions.

Also, the prevention proceedings set up by Law No. 85/2014 on insolvency prevention proceedings and on insolvency procedure does not apply to the following entities:

• credit institutions, investment firms, as well as other financial institutions and entities subject to the provisions of Law No. 312/2015 on the recovery and resolution of credit institutions and investment firms, as well as for the amendment and completion of certain regulatory acts in the financial sector, as amended and supplemented, undertakings for collective investment in transferable securities, as defined in article 2 paragraph (1) of Government Emergency Ordinance No. 32/2012 on undertakings for collective investment in transferable securities and investment management companies, as well as for amending and supplementing Law No. 297/2004 on the capital market, approved with amendments and additions by Law No. 10/2015, with subsequent amendments and additions, and alternative investment funds, as defined in article 3 item 20 of Law No. 74/2015 on alternative investment fund managers, with subsequent amendments and additions;
• insurers and reinsurers, as defined in article 1 paragraph (2) item 3 and 45 of the Law No. 237/2015 on the authorization and supervision of insurance and reinsurance activity, as amended, subject to the provisions of the aforementioned law and the Law No. 246/2015 on the recovery and resolution of insurers, as amended;
• central counterparties as defined in article 2(1) of Regulation (EU) No. 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories; and
• central securities depositories, as defined in article 2 item (1) of Regulation (EU) No. 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No. 236/2012.

In the matter of insolvency prevention proceedings, Law No. 85/2014 on insolvency prevention proceedings and on insolvency procedure shall not affect the debtor’s rights and obligations with respect to personal assets accumulated by the debtor in a privately administered pension fund, voluntary pension funds or occupational pension funds or with respect to private pensions from which the debtor benefits under and under the conditions of the legislation on private pensions.

Public enterprises

3. What procedures are followed in the insolvency of a government-owned enterprise? What remedies do creditors of insolvent public enterprises have?

Romanian insolvency legislation does not provide a different procedure for government-owned enterprises; the same treatment is applied to creditors regardless of the ownership of the insolvent company.

Protection for large financial institutions

4. Has your country enacted legislation to deal with the financial difficulties of institutions that are considered ‘too big to fail’?

Law No. 85/2014 on insolvency prevention proceedings and on insolvency procedure stipulates a special chapter concerning the bankruptcy of credit institutions.

Courts and appeals

5. What courts are involved? What are the rights of appeal from court orders? Does an appellant have an automatic right of appeal or must it obtain permission? Is there a requirement to post security to proceed with an appeal?

All insolvency proceedings, with the exception of appeals, shall fall within the jurisdiction of the court (tribunal) or, where applicable, of the specialized court in whose district the debtor had their registered office or business for at least six months prior to the date of the court’s referral. If a special insolvency division has been established within the court, it shall be competent to conduct the proceedings provided for in Law No. 85/2014 on insolvency prevention proceedings and on insolvency procedure.

The Court of Appeal will be the appellate court for judgments handed down by the syndic judge. Decisions of the Court of Appeal are final. The appellant has an automatic right of appeal and must pay only a stamp duty for the appeal. There is no requirement to post security to proceed with an appeal.

TYPES OF LIQUIDATION AND REORGANIZATION PROCESSES

Voluntary liquidations

6. What are the requirements for a debtor commencing a voluntary liquidation case and what are the effects?

The voluntary dissolution followed by the liquidation procedure is set out by the provisions of Law No. 31/1990 the companies’ law and it can be carried out by the shareholders or with the appointment of a liquidator. The voluntary liquidation procedure requires the decision of the shareholders regarding the dissolution and liquidation.

Liquidation proceedings are aimed to ensure that creditors are fully repaid and any remaining assets are distributed to shareholders, after which the company may be liquidated and deregistered from the Trade Registry. Liquidation does not release the shareholders or associates and does not hinder the opening of insolvency proceedings of the company.

Another available voluntary liquidation procedure is set out by the provisions of Law No.85/2014 on insolvency prevention proceedings and on insolvency procedure, namely, the simplified bankruptcy procedure that applies to the following categories of debtors:

• professionals:
• who have no asset in their patrimony;
• whose articles of association or accounting documents cannot be found;
• whose director may not be found; or
• whose headquarters no longer exist or no longer correspond to the address in the Trade Registry;
• entities that have been subject to voluntary dissolution, prior to submission of the request to initiate insolvency proceedings, even though the judicial liquidator was not appointed yet or, although appointed, his appointment was not registered at the Trade Registry;
• debtors that have declared their intention by filing a claim with the courts to undergo bankruptcy proceeding; and
• any individual or entity who is conducting business-like activities and who has not obtained the necessary authorization for exploitation of a company and is not registered in the special publicity register.

Voluntary reorganizations

7. What are the requirements for a debtor commencing a voluntary reorganization and what are the effects?

The possible voluntary reorganization options for the debtor are the following:

• the restructuring agreement (solvent debtor);
• the composition agreement (solvent debtor); or
• the reorganization plan (insolvent debtor).

The new amendments transposed in the Law No. 85/2014 on insolvency prevention proceedings and on insolvency procedure offer more concise and effective preventive solutions for the debtors aiming to restructure their business. Thus, the two available pre-insolvency are the following options.

The restructuring agreement procedure is the new insolvency prevention procedure whereby the debtor, in order to recover its activity, submits to the confirmation of the syndic judge a restructuring agreement negotiated in advance with the creditors whose claims are affected.

The characteristics and effects of the restructuring agreement are as follows:

• mostly out-of-court procedure, only after negotiations and obtaining votes will the confirmation request be submitted to the syndic judge;
• the negotiation can only be started by the debtor;
• foreclosures are not suspended. The premise for starting negotiations is the good relationship between debtor and creditors, the company in difficulty not being pressured by forced executions started or to be started;
• the flow of interest is not suspended, but their fate will be foreseen after the negotiations, through the restructuring agreement; and
• there is no limit to the negotiation period and no maximum period of the agreement, but monitoring by the restructuring administrator is mandatory for at least three years.

The preventive composition procedure represents the judicial procedure for preventing insolvency, whose opening suspends forced executions under the law, and the debtor recovers its activity and pays all or part of its affected receivables based on a restructuring plan voted by creditors whose claims are affected and approved by the syndic judge.

The characteristics and effects of the preventive composition are as follows:

• it is a judicial procedure;
• the negotiation can only be started by the debtor;
• enforcement actions are suspended for a period of four months, and can be extended up to 12 months;
• the flow of interest and accessories of any kind shall be subject during the negotiation period until the approval of the restructuring plan, subsequently having the regime provided by the plan;
• from the date of initiation of proceedings, it is prohibited to terminate essential contracts or refuse to perform them on the grounds that outstanding amounts have not been paid;
• the negotiation period is 60 days from the opening of the procedure and the restructuring plan may be modified during this period;
• the limitation period shall be suspended from the initiation of the procedure, during negotiations and restructuring, if the plan has been approved; and
• any enterprise in difficulty, but not in a state of insolvency can benefit from those proceedings.

The debtor may propose a reorganization plan in the insolvency proceedings with the approval of the general meeting of shareholders or members, within 30 days of publication of the final statement of claims, provided that the intention to reorganize is previously formulated. The plan may provide either for the restructuring and continuation of the debtor’s business, the liquidation of some of the debtor’s assets, or a combination of the two reorganization options.

Successful reorganizations

8. How are creditors classified for purposes of a reorganization plan and how is the plan approved? Can a reorganization plan release non-debtor parties from liability and, if so, in what circumstances?

The categories of receivables for the restructuring agreement and composition agreement are:

• secured claims;
• salary claims;
• claims of indispensable creditors, where applicable;
• budgetary claims; and
• other unsecured claims.

For debtors who have a turnover of up to €500,000 it is not mandatory to set up categories of receivables.

A restructuring/reorganization plan is considered accepted by a category of claims if the plan is accepted in that category by the absolute majority of the amount of claims in that category. Each claim offers the right to one vote which the holder shall exercise within the category of claims that the respective claim belongs to.

• privileged claims;
• salary claims;
• budgetary claims;
• claims of indispensable creditors; and
• other unsecured claims.

According to Romanian insolvency law, non-debtor parties cannot be released from their liabilities under restructuring/reorganization plans.

Involuntary liquidations

9. What are the requirements for creditors placing a debtor into involuntary liquidation and what are the effects? Once the proceeding is opened, are there material differences to proceedings opened voluntarily?

At the request of any interested person, as well as of the National Trade Registry Office, the court may order the dissolution of the company in cases where: (1) the company no longer has statutory bodies or they can no longer meet; (2) the shareholders or associates have disappeared or have no known domicile or residence; (3) the conditions relating to the registered office are no longer fulfilled; and (4) the company has not completed its share capital in accordance with the law.

After the final judgment of dissolution has become final, the National Trade Registry Office, through the Registrar, at the request of the company, of any interested person or ex officio, shall appoint, by order, a liquidator.

Also, the creditors whose claim on the debtor’s assets has been certain, liquid and payable for more than 60 days may request the opening of the simplified bankruptcy proceedings against the debtors.

There is no notable difference between the voluntary and involuntary proceedings once opened.

Involuntary reorganizations

10. What are the requirements for creditors commencing an involuntary reorganization and what are the effects? Once the proceeding is opened, are there any material differences to proceedings opened voluntarily?

As part of the insolvency proceedings, judicial reorganization is the procedure applied to an insolvent debtor, a legal person, in order to pay its debts according to the payment schedule. The reorganization procedure involves the preparation, approval, confirmation, implementation and compliance with a plan, called a reorganization plan, which may provide, without limitation, for a combination or separately of the following: (1) operational or financial restructuring of the debtor, or both; (2) corporate restructuring by changing the share capital structure; and (3) the restriction of activity by partial or total liquidation of the debtor’s assets.

In this scenario (involuntary reorganization), the reorganization plan is submitted either by the creditors, holding at least 20 percent of the total value of the claims included in the final schedule of claims, or by the judicial administrator.

Expedited reorganizations

11. Do procedures exist for expedited reorganizations (eg, ‘prepackaged’ reorganizations)?

No. The pre-insolvency proceedings does not offer an expedited time-frame for successful implementation of the restructuring plan.

Unsuccessful reorganizations

12. How is a proposed reorganization defeated and what is the effect of a reorganization plan not being approved? What if the debtor fails to perform a plan?

Failure of the pre-insolvency proceedings (ie, restructuring agreement/preventive composition) will lead to the following:

• disapproval by the creditors/dismissal of confirmation by the court;
• failure to comply with the provisions of the restructuring agreement upon request of;
• a creditor whose claim has not been discharged in accordance with the terms of the agreement within a maximum of 60 days from the date specified in the agreement for payment, unless the parties have entered into an agreement to that effect, subject to the rights of other creditors;
• any creditor, if the debtor’s conduct of business during the course of the agreement causes loss to its estate and does not present reasonable prospects of maintaining the viability of the business; and
• to the debtor, if the debtor is unable to continue to perform its obligations under the agreement;
• failure to comply with the obligation to modify the agreement ordered by the syndic judge or the court of appeal within the time limit set by the judgment ordering the modification, either ex officio or at the request of any interested party.

Following the failure of the restructuring agreement:

• the reduced claims shall revive on the date of the judgment closing the proceedings, reduced as a result of payments made during the restructuring agreement procedure; and
• creditors whose rights to the calculation of interest, surcharges or penalties of any kind or expenses, referred to generically as ancillary expenses, have been suspended by the agreement may calculate their ancillary expenses retroactively during the course of the agreement.

After the confirmation of the restructuring agreement and until the closure of the proceedings, the debtor shall not be able to access another insolvency prevention procedure. After the confirmation of the restructuring agreement and until the closure of the proceedings, insolvency proceedings may not be opened against the debtor at the request of an affected creditor. In case the preventive proceedings close without success, an insolvency procedure may be opened.

Failure of the reorganization plan will include the following:

• disapproval by the creditors/dismissal of confirmation by the court;
• if the debtor does not comply with the plan or new debts accrue to creditors in the insolvency proceedings, any of the creditors or the insolvency administrator may at any time request the syndic judge to order that the debtor be declared bankrupt.

The effect of a defeated reorganization plan will automatically begin the bankruptcy procedure.

Corporate procedures

13. Are there corporate procedures for the dissolution of a corporation? How do such processes contrast with bankruptcy proceedings?

The following are cases of dissolution of the limited liability company (LLC) according to the provisions of article 227 of the Companies Law No. 31/1990:

• the lifetime of the LLC has expired;
• the LLC is unable to carry out its object of activity;
• the nullity of the LLC has been declared;
• the shareholders have decided, by resolution, to dissolve the LLC;
• the court has ordered by decision the dissolution of the LLC, at the request of the partners, for serious reasons such as serious disagreements between the partners, which prevent the operation of the LLC;
• the bankruptcy of the LLC was ordered; and
• LLC has been dissolved for other reasons provided for by law or by the company’s articles of association.

According to the provisions of article 229 of Law no. 31/1990, an LLC is also dissolved by bankruptcy, incapacity, exclusion, withdrawal or death of one of the associates, when, due to these causes, the number of associates has been reduced to one. An exception is made in cases where the articles of association contain a clause on continuation with heirs or where the remaining partner decides to continue the existence of the company in the form of a single-member limited liability company.

The dissolution of the company has the effect of opening the liquidation procedure. Dissolution takes place without liquidation in case of merger or total division of the company or in other cases provided by law.

If the liquidator observes that there are insufficient assets to fully repay the debts, they must request the opening of the bankruptcy procedure of the debtor.

The main differences between voluntary liquidation and bankruptcy refer to the ability to fully repay all the registered debts (eg, all the creditors have to be fully paid in liquidation, to close the procedure, while in bankruptcy, the creditors can be paid just in part, in a specific order provided by the law according to their registered quota in the statement of affairs).

Also, the liquidation process can be carried out by company’s existing management, while in bankruptcy it mandatory to appoint a third person (ie, insolvency practitioner). Liquidation procedures are far less formal and have less strict deadlines.

Conclusion of case

14. How are liquidation and reorganizationcases formally concluded?

The pre-insolvency proceedings are formally closed when:

• the provisions of the restructuring agreement are fulfilled at the request of either party or of the restructuring trustee to the syndic judge. In this case, if the agreement provides for reductions of claims, the reductions shall become final from the date of the judgment closing the proceedings;
• failure to comply with the provisions of the restructuring agreement; and
• failure to comply with the obligation to modify the agreement ordered by the syndic judge or the court of appeal within the time limit set by the judgment ordering the modification, either ex officio or at the request of any interested party.

The liquidation procedure under the Law No. 31/1990 (Companies’ Law) is concluded when all the registered debts are fully paid by submitting a final liquidation report with no debts to the Trade Registry, the remaining liquidation estate being distributed between its shareholders.

The bankruptcy procedure under the Law No. 85/2014 on insolvency prevention proceedings and on insolvency procedure is usually closed when the syndic judge has approved the final report, when all funds or assets of the debtor’s estate have been distributed and when unclaimed funds have been deposited with the bank.

A reorganization through going-concern or winding-up procedure on the basis of a plan will be closed, by a judgment, on the basis of a report by the liquidator that establishes the fulfillment of all payment obligations assumed under the confirmed plan, as well as the payment of current claims falling due or the staggering of their payment, by agreement, in the period following the closure of the procedure, including budgetary claims.

INSOLVENCY TESTS AND FILING REQUIREMENTS

Conditions for insolvency

15. What is the test to determine if a debtor is insolvent?

Insolvency is that state of the debtor’s assets characterized by insufficient funds available to pay debts that are certain, liquid and due and presumed when the debtor, 60 days after the due date, has not paid their debt to the creditor. The threshold for the outstanding debt both for the creditor and the debtor in order to open the insolvency procedure is of 50,000 leu.

Mandatory filing

16. Must companies commence insolvency proceedings in particular circumstances?

A debtor in a state of insolvency must apply to the court to be subject to the provisions of Law No. 85/2014 on insolvency prevention proceedings and on insolvency procedure within a maximum of 30 days from the occurrence of the state of insolvency.

DIRECTORS AND OFFICERS

Directors’ liability – failure to commence proceedings and trading while insolvent

17. If proceedings are not commenced, what liability can result for directors and officers? What are the consequences for directors and officers if a company carries on business while insolvent?

Personal civil liability for the company’s debts – the members of the management and/or supervisory bodies of the company, as well as any other persons who contributed to the insolvency of the debtor. A person liable, as determined by a final court order, may be disqualified from being a director in any company, for a 10-year term.

Potential criminal liability (minimum fine of approximately €383 up to a maximum of €31,915 or imprisonment up to five years, or both).

Directors’ liability – other sources of liability

18. Apart from failure to file for proceedings, are corporate officers and directors personally liable for their corporation’s obligations? Are they liable for corporate pre-insolvency or pre-reorganization actions? Can they be subject to sanctions for other reasons?

Apart from the obligation to request the opening of the insolvency proceedings, corporate officers and directors are personally liable if they have committed one of the following acts, if it resulted in the insolvent state:

• they have used the assets or credits of the legal person for their own benefit or for the benefit of another person;
• they have carried out production, commercial or service activities for their own benefit, under the cover of the legal person;
• they have ordered, for their own benefit, the continuation of an activity that manifestly caused the legal person to cease payments;
• they have kept fictitious accounts, caused accounting documents to disappear or failed to keep accounts in accordance with the law. In the event of failure to hand over accounting documents to the receiver or liquidator, both fault and the causal link between the act and the damage shall be presumed. The presumption is relative;
• they have misappropriated or concealed part of the assets of the legal person or fictitiously increased its liabilities;
• they have used ruinous means to procure funds for the legal person in order to delay payments;
• in the month preceding the cessation of payments, they have paid or arranged to pay in preference to one creditor to the detriment of other creditors; and
• they have committed any other act with intent that contributed to the debtor’s insolvency ascertained in accordance with the provisions of the Law No. 85/2014 on insolvency prevention proceedings and on insolvency procedure.

There are no special legal provisions regarding the liability of the corporate directors for the actions taken before the pre-insolvency proceedings.

Directors’ liability – defenses

19. What defenses are available to directors and officers in the context of an insolvency or reorganization?

Where there are several directors, each individual director shall be jointly liable unless the events contributing to the insolvency occurred before the time period in which they performed their mandate or held the position.

The respective persons may not be held liable if, within the corporate governance bodies of the company, they objected to the actions or facts that contributed to the insolvency or if they were absent when such decisions were made and also, requested their opposition to be written down.

The directors may not be held liable if, in the month prior to the cessation of payments, payments were made, in good faith, under an arrangement concluded with the creditors, following the extrajudicial negotiations for debt restructuring, provided that such arrangement was likely to lead to the financial recovery of the debtor and was not intended to prejudice or discriminate against some creditors.

Shift in directors’ duties

20. Do the duties that directors owe to the corporation shift to the creditors when an insolvency or reorganization proceeding is likely? When?

Not entirely. After the opening of the proceedings, the general meeting of the debtor’s shareholders, associates or members shall appoint, at their expense, the special administrator who will conduct the entire business activity of the debtor under the supervision of the insolvency administrator.

The creditors, through their representative bodies (ie, the assembly and the committee) decide upon the opportunity matters concerning the debtors’ estate.

The term of office of the statutory administrators shall cease on the date on which the right of administration is terminated or on the date on which the special administrator is appointed. Termination of the mandate shall impose an obligation to hand over the management.

Once the right of administration has been lifted, the debtor is represented by the insolvency administrator/trustee, who also manages its business, and the special administrator’s mandate will be reduced to representing the interests of the shareholders, associates or members.

Directors’ powers after proceedings commence

21. What powers can directors and officers exercise after liquidation or reorganization proceedings are commenced by, or against, their corporation?

The term of office of the statutory administrators shall cease on the date on which the right of administration is terminated or on the date on which the special administrator is appointed. The Special Administrator has the following duties:

• to participate, as the debtor’s representative, in the proceedings provided for in articles 117-122 or those resulting from non-compliance with article 84;
• to formulate objections in the proceedings governed by this law;
• to propose a reorganization plan;
• to administer the debtor’s activity, under the supervision of the insolvency administrator, after confirmation of the plan, only if the debtor’s right of administration has not been withdrawn;
• after the bankruptcy has been filed, to take part in the inventory, sign the act, receive the final report and the closing financial statement, attend the meeting convened to resolve objections and approve the report; and
• to receive notification of the closure of the proceedings.

MATTERS ARISING IN A LIQUIDATION OR REORGANIZATION

Stays of proceedings and moratoria

22. What prohibitions against the continuation of legal proceedings or the enforcement of claims by creditors apply in liquidations and reorganizations? In what circumstances may creditors obtain relief from such prohibitions?

From the date of the opening of the proceedings, all judicial and extrajudicial actions or enforcement measures for the realization of claims on the debtor’s assets shall be automatically suspended. Their rights may only be enforced in the insolvency proceedings by filing claims. They may be reinstated only if the decision to open the proceedings is set aside, the decision to open the proceedings is revoked or the proceedings are closed.

If the opening decision is set aside or, where appropriate, revoked, judicial or extrajudicial proceedings for the enforcement of claims against the debtor’s assets may be resumed and enforcement measures may be resumed. On the date on which the judgment opening the proceedings becomes final, both the judicial or extrajudicial proceedings and the suspended enforcement measures shall cease.

A creditor who is the holder of a claim that has a preferential claim may apply to the syndic judge, after summoning the creditors’ committee, the special administrator and the insolvency administrator, for the lifting of the suspension in respect of their claim and its immediate recovery in the proceedings, on condition that the procedural costs paid out of the price of the property to which the claim relates, in one of the following situations:

• Where the value of the object of the security, as determined by an authorize devaluator, is fully covered by the total value of the claims and parts of claims secured by that object, if:
• the subject matter of the collateral is not material to the success of the proposed reorganization plan;
• the subject matter of the security is part of an independent whole and its separate divestiture and sale does not diminish the value of the remaining assets;
• When there is no adequate protection of the secured claim in relation to the object of the security, because of:
• diminishing in the value of the object of the security or the existence of a real danger that it will suffer an appreciable diminution;
• diminishing in the value of the secured part of a lower-ranking claim as a result of the accrual of interest, surcharges and penalties of any kind on a higher-ranking secured claim; and
• lack of insurance of the object of the security against the risk of loss or deterioration.

In pre-insolvency proceedings, the syndic judge may lift the suspension of enforcement in the following cases:

• at the request of creditors, where there are reasonable indications that the restructuring plan is not supported by the majority required by law or where one or more creditors are or would be unfairly prejudiced by the stay of enforcement; and
• at the request of the administrator in composition or the debtor.

Doing business

23. When can the debtor carry on business during a liquidation or reorganization? Is any special treatment given to creditors who supply goods or services after the filing? What are the roles of the creditors and the court in supervising the debtor’s business activities?

After opening the liquidation and bankruptcy proceedings, the debtor can no longer carry out its business activity, considering that it is inconsistent with the concept of current activity, the sole purpose of these procedures being the liquidation of the debtors’ estate in order to cover the statement of affairs.

With regard to the pre-insolvency procedures and reorganization, the debtor’s activity shall continue as usual under the supervision of the insolvency administrator, the creditors for opportunity aspects and the court for legal aspects.

The current creditors, who continue to do business with the debtor after the opening of the procedure, shall benefit from special treatment being paid with priority towards creditors already registered in the receivables’ table.

Post-filing credit

24. May a debtor in a liquidation or reorganization obtain secured or unsecured loans or credit? What priority is or can be given to such loans or credit?

Financing granted to the debtor during the observation period to carry out their current activities, with the approval of the creditors’ assembly, benefits from being considered a priority in respect of repayment. The financing will be guaranteed by pledging goods or rights that are not the object of preferential causes, or, if there are no such goods or rights available, with the consent of the creditors benefiting from those causes.

If the creditors’ agreement cannot be obtained, priority for repayment of the claims will diminish the satisfaction regime of the creditors that benefit from the causes of preference proportionally, by reference to the entire value of the goods or rights that form the object of the cause of preference.

If there are no or insufficient assets that can be encumbered by causes of preference in favor of creditors granting financing during the observation period to carry out current activities, they will benefit from priority in respect of the unsecured part of the claim.

For new and/or interim financing granted under the pre-insolvency proceedings, a lien is established on all movable and immovable property of the debtor, free of encumbrances at the time of establishment. The lien on such assets of the borrower shall be recorded in the relevant publicity registers and shall rank prior to any subsequent liens or mortgages.

Sale of assets

25. In reorganizations and liquidations, what provisions apply to the sale of specific assets out of the ordinary course of business and to the sale of the entire business of the debtor? Does the purchaser acquire the assets ‘free and clear’ of claims or do some liabilities pass with the assets?

There are no specific provisions regarding the sale of assets in a liquidation procedure under the Law No. 31/1990 Companies’ Law.

In bankruptcy proceedings, specific rules apply.

The liquidation will start immediately after the liquidator has completed the inventory and submitted the valuation report. Assets may be sold as a whole or individually. Any block sale of assets as a whole, whether in reorganization or in bankruptcy, may be considered as a transfer of assets if it complies with certain conditions.

The type of sale of the assets, namely, public auction, direct negotiation or a combination of the two, and the sale regulations corresponding to the method of sale opted for shall be approved by the creditors’ meeting, based on the proposal of the judicial liquidator. For the purpose of valuing the debtor’s assets, with the agreement of the creditors’ committee, the judicial liquidator may engage an authorized valuator on behalf of the debtor and fix his or her fee.

Assets capitalized by the insolvency administrator or liquidator in the exercise of their duties shall be acquired free of all encumbrances, such as liens, mortgages, pledges or rights of retention, sequestrations of any kind. Exceptions to this regime shall be measures ordered in criminal proceedings for special or extended confiscation.

Negotiating sale of assets

26. Does your system allow for ‘stalking horse’ bids in sale procedures and does your system permit credit bidding in sales?

Yes, it does. The type of the sale of the goods (public auction, direct negotiation or a combination of the two) and the sale regulation corresponding to the sale method chosen are approved by the creditors’ meeting, based on the proposal of the judicial liquidator. Within those limits, the judicial liquidator may propose to the creditors stalking horse sales bids.

Creditors or their successors (ie, assignees) can participate in the sale procedure and make payment of the purchase price by reducing the amount of their claim against the debtor; thus, they pay the price with the value of their receivable entered in the table of debts.

However, depending on the rank of their claim, creditors must pay the value of the higher claims listed in the table, as well as the costs of the proceedings. This procedure is mainly used by secured creditors in procedures for the sale of the goods on which they bear their guarantee because they no longer have higher receivables to pay apart from the procedural expenses.

The procedure is a public sale procedure in which creditors can bid in competition with other interested persons. The winner of the auction is the one who offers the highest price; however, creditors have a limit as they cannot award the asset at a value of less than 75 per cent of the valuation value. The sale is organized by the judicial liquidator. The judge intervenes only in the case of appeals.

Rejection and disclaimer of contracts

27. Can a debtor undergoing a liquidation or reorganization reject or disclaim an unfavorable contract? Are there contracts that may not be rejected? What procedure is followed to reject a contract and what is the effect of rejection on the other party? What happens if a debtor breaches the contract after the insolvency case is opened?

Contracts in progress are deemed to be maintained at the date of the opening of the insolvency/bankruptcy procedure. Any contractual clauses terminating outstanding contracts, forfeiting the benefit of the term, modifying the contract to the detriment of the debtor or declaring early enforceability for the reason of the opening of proceedings shall be deemed not to have been written.

The provisions relating to the maintenance of ongoing contracts and the nullity of termination or acceleration clauses shall not apply to qualified financial contracts and bilateral netting transactions under a qualified financial contract or a bilateral netting agreement.

To maximize the value of the debtor’s assets, within a limitation period of three months from the date of the opening of the proceedings, the insolvency administrator/liquidator may terminate any contracts, unexpired leases, other long-term contracts, as long as these contracts have not been fully or substantially performed by all parties involved.

The liquidator must reply within 30 days of receipt of the notice to the contractor, given within the first three months of the opening of the proceedings, asking them to terminate the contract; in the absence of such a reply, the liquidator will no longer be able to request performance of the contract, which will be deemed to have been terminated. The contract shall be deemed terminated:

• on the expiry of a period of 30 days after receipt of the request of the co-contractor to terminate the contract, if the receiver/judicial liquidator does not respond; or
• on the date of notification of termination by the liquidator.

If the liquidator/judicial liquidator requests the performance of the contract, they shall state quarterly in the activity reports whether the debtor has the funds necessary to pay for the goods or services provided by the other party.

The debtor shall forfeit the benefit of the time limit if, within the first three months of the opening of the proceedings, the co-contractor notifies the liquidator of their intention to terminate the contract or to declare the debt due early. After the contract has been maintained, the contracting party may request its termination on the grounds of the debtor’s fault, the request being decided by the syndic judge.

There are no specific provisions regarding the treatment of termination of contracts in pre-insolvency proceedings.

Intellectual property assets

28. May an IP licensor or owner terminate the debtor’s right to use the IP when a liquidation or reorganization is opened? To what extent may IP rights granted under an agreement with the debtor continue to be used?

There are no special pre-insolvency or insolvency provisions regarding the IP rights owner.

Personal data

29. Where personal information or customer data collected by a company in liquidation or reorganization is valuable, are there any restrictions in your country on the use of that information or its transfer to a purchaser?

Romanian insolvency law contains no special rules regarding personal information or customer data. Nevertheless, Regulation (EU) No. 2016/679 (General Data Protection Regulation) provides strict limitations on the use and transfer of personal information or customer data, irrespective of whether a company is undergoing liquidation or reorganization procedures.

Arbitration processes

30. How frequently is arbitration used in liquidation or reorganization proceedings? Are there certain types of disputes that may not be arbitrated? Can disputes that arise after the liquidation or reorganization case is opened be arbitrated with the consent of the parties?

Arbitration proceedings involving an insolvent debtor are not frequently seen in practice. However, an agreement comprising an arbitration clause shall fully apply to an insolvent debtor that will settle such dispute to the competent arbitral tribunal, including the disputes arising after the opening of the proceedings.

CREDITOR REMEDIES

Creditors’ enforcement

31. Are there processes by which some or all of the assets of a business may be seized outside of court proceedings? How are these processes carried out?

From the date of the opening of the arrangement procedure, all enforcement proceedings against the debtor shall be suspended by operation of law or shall not commence, irrespective of the nature of the claim, for a period of four months. During the period of suspension, the limitation period for the right to request enforcement shall also be suspended. During this period, the suspension may not be lifted.

By exception to the above, the enforcement of wage claims shall not be suspended as of right. It may be suspended by the syndic judge at the request of the debtor, if the debtor proves their ability to pay the amounts for which the suspension is ordered even in installments, at least in the amount that would be covered in the enforcement procedure.

The automatic stay of enforcement shall be maintained for a maximum period of four months, but not later than the date of a judgment approving the restructuring plan or closing the proceedings following the non-fulfillment of the conditions for its confirmation.

For good cause, at the request of the debtor, a creditor or the administrator in composition, the syndic judge may order the extension of the measure of suspension of enforcement or grant a new suspension for one or more specified periods. The total duration of the suspension, with extensions and renewals, may not exceed 12 months from the date of the opening of the composition procedure. The following may constitute good cause, but are not limited to:

• relevant progress has been made in the negotiations on the restructuring plan or negotiations have been completed and the restructuring plan has not yet been confirmed; and
• there is no unfair prejudice to creditors’ rights.

If a decision approving the restructuring plan is not delivered by the court within the time-limit of four months, the creditors whose enforcement has been suspended may proceed with the enforcement of the debtor’s claim, unless the syndic judge has ordered, at the request of the debtor or the administrator in composition, an extension of the suspension or a new suspension for good cause.

Enforcement proceedings that are not likely to jeopardize the restructuring and to which the debtor has given their consent may be continued at the request of the creditor to the syndic judge within a maximum of five days from the date of the termination of the suspension by operation of law.

Unsecured credit

32. What remedies are available to unsecured creditors? Are the processes difficult or time-consuming? Are pre-judgment attachments available?

In insolvency, the unsecured creditors do not benefit from relief remedies regarding the enforcement against the debtors’ assets.

In pre-insolvency proceedings, the syndic judge may lift the suspension of enforcement at the request of creditors (including unsecured), where there are reasonable indications that the restructuring plan is not supported by the majority required by law or where one or more creditors are or would be unfairly prejudiced by the stay of enforcement.

CREDITOR INVOLVEMENT AND PROVING CLAIMS

Creditor participation

33. During the liquidation or reorganization, what notices are given to creditors? What meetings are held and how are they called? What information regarding the administration of the estate, its assets and the claims against it is available to creditors or creditors’ committees? What are the liquidator’s reporting obligations?

Creditors are individually informed about the opening of the procedure by postal notifications. After the opening of the procedure, they are informed of the actions carried out through an activity report prepared by the insolvency practitioner.

The judicial administrator submits a monthly report describing the manner in which they performed their duties, including those relating to the follow-up of operations carried out on the basis of prior notice, justification of expenses incurred in administering the procedure or other expenses incurred from existing funds, if applicable, at the stage of carrying out the inventory.

The report includes information on compliance with tax obligations, information regarding the obtainment or need to update the authorizations for carrying out the activity, the control acts concluded by control bodies and the fee collected by the judicial administrator, specifying how to calculate it.

The insolvency practitioner convenes the creditors to decide on the issues in the procedure in two sessions: the creditors’ meeting and the creditors’ committee. The first involves all creditors, while the second involves creditors’ representatives (three to five creditors).

Creditor representation

34. What committees can be formed (or representative counsel appointed) and what powers or responsibilities do they have? How are they selected and appointed? May they retain advisers and how are their expenses funded?

The creditors are represented in the insolvency proceedings through the assembly and the committee.

The creditors’ assembly refers to all registered creditors with voting rights and decides on the important aspects in the procedure; it appoints the insolvency practitioner, approves the reorganization plan, decides the opening of the bankruptcy and approves the method of capitalization of the assets.

The creditors’ committee is formed of three to five creditors from among those entitled to vote, with the claims benefiting from preferential treatment, the largest budgetary and unsecured claims by value and decides on relevant issues such as: it approves certain operations in the debtor’s activities, confirms the specialist experts to assist the insolvency practitioner and undertakes certain legal actions. More specifically, the creditors’ committee has the following duties:

• to review the debtor’s situation and make recommendations to the creditors’ meeting on the debtor’s continuation and proposed reorganization plans;
• to negotiate with the liquidator or receiver who wishes to be appointed by the creditors in the case of the terms of the appointment;
• to take cognizance of the reports drawn up by the liquidator or liquidator, examine them and, where appropriate, lodge objections thereto;
• to draw up reports to be submitted to the creditors’ meeting on the measures taken by the liquidator or liquidator and their effects and to propose other measures, giving reasons;
• to request the debtor’s right of administration to be withdrawn; and
• to take action against the debtor for the acts or operations detrimental to creditors, where such actions have not been brought by the liquidator or the judicial liquidator.

The creditors have the right to be represented by advisers in the representative bodies mentioned above at their own expense.

Enforcement of estate’s rights

35. If the liquidator has no assets to pursue a claim, may the creditors pursue the estate’s remedies? If so, to whom do the fruits of the remedies belong? Can they be assigned to a third party?

If there are no funds to pursue legal claims, the liquidator may request their advancement by the creditors or the advancement from the general liquidation fund, constituted at the level of the insolvency practitioners’ organization. No third parties may be appointed to carry out the procedural steps.

Claims

36. How is a creditor’s claim submitted and what are the time limits? How are claims disallowed and how does a creditor appeal? Can claims for contingent or unliquidated amounts be recognized? Are there provisions on the transfer of claims and must transfers be disclosed? How are the amounts of such claims determined?

With the exception of employees whose claims will be registered by the insolvency administrator according to the accounting records, all other creditors whose claims predate the opening of the proceedings shall lodge their claims via mail or by direct registration at the court within the time limit laid down in the opening decision.

The deadline for registration of the application for admission of claims on the debtor’s assets is a maximum of 45 days from the opening of the procedure and the requirements for a registered claim to be considered valid. The documents justifying the claim and the documents establishing preferential causes must be attached to the request within the period established for the submission of the application for admission of the claim.

The claim on the basis of which insolvency proceedings have been opened shall be registered by the insolvency administrator, on the basis of the supporting documents attached to the application for the opening of the proceedings and after verification, without the need to submit an application for admission, unless ancillary relief is calculated by the date of opening of proceedings.

The debtor, the creditors and any other interested party will be able to lodge an appeal to the table of claims with regard to the claims and rights entered or, as the case may be, not entered by the liquidator or judicial liquidator in the table.

Appeals must be lodged with the court within seven days of the publication of the preliminary table of claims in the Insolvency Gazette, both in the general procedure and in the simplified procedure. Under penalty of annulment, the appeal shall be accompanied by the original proof of payment of the stamp duty, as well as by all the documents that the party intends to use to prove its claims, with an indication of any other evidence required, except for that which is not in the possession of the party or is not known at the time the appeal is lodged.

An application for admission of claims must be made even if the claims are not established by title. Claims that are not due or that are subject to a condition at the date of the opening of the proceedings shall be admitted to the creditors’ estate and shall be entitled to participate in the distribution of amounts to the extent permitted by this title.

The right to vote and the right to distribution of the holders of claims subject to a suspensive condition at the time of the opening of the proceedings, including the holders of claims whose recovery is conditional on the prior enforcement of the principal debtor, shall arise only after the fulfillment of that condition.

Claims arising after the date of opening of the proceedings, during the observation period or during the judicial reorganization procedure shall be paid in accordance with the documents from which they arise and need not be entered in the creditors’ list. The provision shall apply accordingly to claims arising after the date of the opening of bankruptcy proceedings.

There are no special provisions regarding the transfer of claims where common law applies. The insolvency administrator informs the creditors about the transfers made in the table of receivables. A claim acquired at a discount can be enforced for its full-face value because the purchase price does not limit the value of the receivable.

No interest, surcharges or penalties of any kind or expenses, referred to generically as incidental expenses, may be added to claims arising prior to the date of the opening of the proceedings, except for the secured claims which are entitled to accessory charges to be calculated according to the documents from which the claim arises, up to the date of selling of the asset. This provision also applies in the event of failure of the reorganization plan and sale of the asset in bankruptcy proceedings.

If a reorganization plan is confirmed, interest, surcharges or penalties of any kind or expenses incidental to obligations arising after the date of the opening of the general proceedings shall be paid in accordance with the documents resulting therefrom and the provisions of the payment schedule. If the plan fails, they shall be due up to the date of the opening of the bankruptcy proceedings.

Set-off and netting

37. To what extent may creditors exercise rights of set-off or netting in a liquidation or in a reorganization? Can creditors be deprived of the right of set-off either temporarily or permanently?

In the case of preventive restructuring proceedings and voluntary liquidation proceedings, there is no ex lege set-off prescribed.

The opening of insolvency proceedings shall not affect the right of any creditor to set off a claim against the debtor’s claim against them, where the conditions laid down by law for statutory set-off are fulfilled at the time of the opening of proceedings. Set-off may also be established by the liquidator or the judicial liquidator and shall also apply to mutual claims arising after the opening of insolvency proceedings.

In insolvency, it is prohibited to set off against the insolvent debtor claims that are acquired after the opening of insolvency proceedings against claims arising before the opening of the insolvency proceedings.

Modifying creditors’ rights

38. May the court change the rank (priority) of a creditor’s claim? If so, what are the grounds for doing so and how frequently does this occur?

The only means by which the court can intervene and change the preferential rank of a creditor’s claim is by admitting an appeal against the registration of such claim in the table of claims. It refers, as a rule, to the guarantees underlying the entry of the claim in the category of secured claims and the value of these guarantees, as resulting from the valuation report drawn up in the procedure. Such situations are very frequent in insolvency proceedings.

Priority claims

39. Apart from employee-related claims, what are the major privileged and priority claims in liquidations and reorganizations? Which have priority over secured creditors?

The funds obtained from the sale of goods and rights of the debtor’s estate, encumbered, in favor of the creditor, by preferential claims, will be distributed in the following order:

• fees, stamps and any other expenses relating to the sale of the property in question, including the expenses necessary for the preservation and administration of such property, as well as expenses advanced by the creditor in the enforcement proceedings, claims of utility suppliers arising after the opening of the proceedings, the remuneration due at the date of distribution to persons employed in the common interest of all creditors, to be borne pro rata to the value of all the assets of the debtor’s estate; and
• claims of creditors who are beneficiaries of a preferential cause of action arising during insolvency proceedings. These claims comprise capital, interest and other accessories, as appropriate.

Employment-related liabilities

40. What employee claims arise where employees’ contracts are terminated during a restructuring or liquidation? What are the procedures for termination? (Are employee claims as a whole increased where large numbers of employees’ contracts are terminated or where the business ceases operations?)

Employees’ individual and collective rights, including information and consultation rights, provided for by law or collective labor agreements, are not affected by pre-insolvency proceedings.

After the date of opening of the proceedings, the individual employment contracts of the debtor’s staff may be terminated as a matter of urgency by the insolvency administrator/liquidator. The insolvency administrator/liquidator will only grant the dismissed staff the statutory notice period. Employees do not have special claims arising from the termination of contracts during restructuring or liquidation. The special legislation on labor law and the provisions of the employment contract or collective labor contract apply.

Pension claims

41. What remedies exist for pension-related claims against employers in insolvency or reorganization proceedings and what priorities attach to such claims?

There are no special provisions on pension-related claims. The money collected as private pensions does not benefit from a special payment rank. All money owed to the state is classified as budgetary receivables, while money owed to private individuals is generally represented by unsecured receivables, with a lower priority rank in the table of claims.

Environmental problems and liabilities

42. Where there are environmental problems, who is responsible for controlling the environmental problem and for remediating the damage caused? Are any of these liabilities imposed on the insolvency administrator personally, secured or unsecured creditors, the debtor’s officers and directors, or on third parties?

The polluter pays principle also applies to insolvent debtors, the responsibility belonging to the special administrator (if the debtor remains in possession) or the judicial administrator (if the debtor is not in possession anymore). In bankruptcy, the liquidator, in their capacity of legal representative of the debtor must manage environmental problems.

The special environmental legislation expressly states that environmental claims are paid as a priority in the event of insolvency, however, the insolvency procedure contains contrary provisions in the matter of distributions made in the procedure.

Liabilities that survive insolvency or reorganization proceedings

43. Do any liabilities of a debtor survive an insolvency or a reorganization?

By the closure of the proceedings, the judge syndic, the administrator/judicial liquidator and all persons assisting them are discharged from any duties or responsibilities in relation to the proceedings, the debtor and their estate, creditors, holders of preferential rights, shareholders or associates.

By the closure of bankruptcy proceedings, the professional debtor who is a natural person shall be discharged from their outstanding obligations. If the professional debtor who is a natural person has been convicted of fraudulent bankruptcy, these provisions shall not apply. Where, in the course of the proceedings, fraudulent payments or transfers have been definitively established, the professional debtor (natural person) shall be discharged only to the extent that they have been paid in the proceedings.

A debtor who is a natural person and who has been discharged from his or her outstanding obligations may access any support facilities for entrepreneurs provided by law.

On the date of confirmation of a reorganization plan, the debtor shall be discharged from the difference between the amount of the obligations that the debtor had prior to the confirmation of the plan and the amount provided for in the plan during the course of the judicial reorganization proceedings. In the event of a transfer to bankruptcy, the situation established by the final table of all claims against the debtor provided shall be restored, less the amounts paid during the reorganization plan.

There is another situation in which the debtor remains liable even after the closure of the reorganization proceedings, namely, if the reorganization plan provides for the rescheduling of debts outside the reorganization period.

Distributions

44. How and when are distributions made to creditors in liquidations and reorganizations?

In liquidation, the distributions are made either by the shareholders or by the liquidator based on a distribution plan followed by a final liquidation report.

In reorganizations, distributions are made according to the payment schedule or restructuring plans, depending on the cash receipts from the current activity. In bankruptcy, distributions are made at the moment of capitalization of the assets or recovery of debts.

The main difference is that in the reorganization, the rule is that the distributions are made pro rata to all the creditors registered in the reorganization plan, while in bankruptcy the distributions are made according to the order of preference in the table. Therefore, in a reorganization, the receivables are paid at once, while in liquidation in stages.

SECURITY

Secured lending and credit (immovables)

45. What principal types of security are taken on immovable (real) property?

Claims benefiting from a preferential cause of action are those claims that are accompanied by a lien and/or a right of mortgage and/or rights assimilated to a mortgage, in accordance with the Civil Code, and/or a right of pledge on the debtor’s assets, regardless of whether the debtor is the principal debtor or a third-party guarantor towards the persons benefiting from the preferential causes of action. The most common type of security is the mortgage on real estate.

Secured lending and credit (movables)

46. What principal types of security are taken on movable (personal) property?

Claims benefiting from a preferential cause of action are those claims that are accompanied by a lien and/or a right of mortgage and/or rights assimilated to a mortgage, in accordance with the Civil Code, and/or a right of pledge on the debtor’s assets, regardless of whether the debtor is the principal debtor or a third-party guarantor towards the persons benefiting from the preferential causes of action. The most common types of security are pledges on future claims, pledge on contracts that are assigned in favor of secured creditors, pledges on accounts, etc.

CLAWBACK AND RELATED-PARTY TRANSACTIONS

Transactions that may be annulled

47. What transactions can be annulled or set aside in liquidations and reorganizations and what are the grounds? Who can attack such transactions?

The insolvency administrator/liquidator may bring actions before the syndic judge for the annulment of fraudulent acts or operations of the debtor to the detriment of the creditors’ rights, during the two years preceding the opening of the proceedings.

The following acts or operations of the debtor may be annulled for the restitution of the property transferred or the value of other services rendered:

• acts of gratuitous transfer carried out in the two years preceding the opening of the proceedings; sponsorship for humanitarian purposes is exempt;
• operations in which the debtor’s benefit clearly exceeds that received, carried out within the six months preceding the opening of the procedure;
• acts concluded in the two years prior to the opening of the proceedings with the intention of all parties involved in them to evade the creditors or otherwise prejudice their rights;
• deeds of transfer of property to or for the benefit of a creditor for the discharge of a previous debt, made within six months prior to the opening of proceedings, if the amount which the creditor could obtain in the event of bankruptcy of the debtor is less than the value of the deed of transfer;
• the establishment of a preferential right in respect of a claim unsecured in the six months prior to the opening of proceedings;
• advance payments of debts made in the six months prior to the opening of the proceedings, if their due date had been fixed for a date after the opening of the proceedings; and
• acts of transfer or assumption of obligations made by the debtor within the two-year period prior to the opening of the proceedings with the intention of concealing activities, delaying the state of insolvency or defrauding a creditor.

These provisions shall not apply to acts concluded in good faith in execution of an agreement with creditors concluded as a result of out-of-court negotiations for the restructuring of the debtor’s debts, provided that the agreement was reasonably conducive to the financial recovery of the debtor and was not intended to prejudice and/or discriminate against any creditors.

The above provisions shall also apply to legal acts concluded in the pre-insolvency proceedings.

An action for the annulment of fraudulent acts concluded by the debtor to the detriment of creditors may be brought by the liquidator or judicial liquidator within one year of the date of expiry of the period for drawing up the report on the causes of insolvency, but not later than 16 months from the date of the opening of the proceedings. If the action is upheld, the parties shall be restored to their previous situation and the charges existing at the date of the transfer shall be reinstated.

The creditors’ committee may bring such an action before the syndic judge if the receiver or judicial liquidator does not do so. A creditor holding more than 50 percent of the value of the claims entered in the creditor’s account may bring an action under the same conditions.

No application may be made for the annulment of an act of creation or transfer of property made by the debtor in the normal course of his business.

Equitable subordination

48. Are there any restrictions on claims by related parties or non-arm’s length creditors (including shareholders) against corporations in insolvency or reorganization proceedings?

Creditors who, directly or indirectly, control, are controlled or are under joint control with the debtor may vote on the reorganization plan, provided that the payment schedule does not offer them any amount or offers them less than they would receive in the event of bankruptcy and that any such payments be granted to them in the lowest order of priority.

In the event of bankruptcy, the receivables representing the credits granted to the debtor legal person by an associate or shareholder holding at least 10 per cent of the share capital of the voting rights in the general meeting of the associates or, as the case may be, by a member of the economic interest will be paid with the lowest order of priority.

Lender liability

49. Are there any circumstances where lenders could be held liable for the insolvency of a debtor?

There are no special provisions in this case. However, the general grounds for triggering the personal liability of any person committing an act with intent that contributed to the debtor’s insolvency do apply.

GROUPS OF COMPANIES

Groups of companies

50. In which circumstances can a parent or affiliated corporation be responsible for the liabilities of subsidiaries or affiliates?

The rule is that each company in the group will be responsible for its own assets for the debts incurred. The companies in the group can answer only when they have previously committed to guaranteeing their own patrimony. A company cannot order a distribution of group assets pro rata.

Combining parent and subsidiary proceedings

51. In proceedings involving a corporate group, are the proceedings by the parent and its subsidiaries combined for administrative purposes? May the assets and liabilities of the companies be pooled for distribution purposes?

The insolvency law provides a legal frame for the insolvency procedure of group companies, but refers to the efficiency of the administration of the insolvency files (by insolvency practitioners and courts) and not the measures regarding the merging of patrimonies or joint and several liabilities.

INTERNATIONAL CASES

Recognition of foreign judgments

52. Are foreign judgments or orders recognized, and in what circumstances? Is your country a signatory to a treaty on international insolvency or on the recognition of foreign judgments?

The procedure for recognizing the judgments of other states is a formality required before any form of forced execution is initiated on Romanian territory. Decisions that enjoy full recognition are exempted from the procedure, and judgments concerning precautionary measures or those given with provisional execution are excluded from the procedure.

Judicial decisions that enjoy full recognition are those that concerning the personal status of foreign citizens. The procedure for recognizing and enforcing foreign judgments is always a judicial one, namely, that it involves the intervention of a court. The request may concern either exclusively the recognition or both the recognition and execution of the foreign decision.

The application for recognition shall be accompanied by one of the following documents:

• a certified copy of the judgment opening the foreign proceedings and appointing the foreign representative;
• a certificate issued by the foreign court certifying the existence of foreign proceedings and the appointment of the foreign representative;
• in the absence of the means of proof referred to above, any other proof of the opening of foreign proceedings and of the appointment of the foreign representative, admissible under the conditions laid down in Government Ordinance No. 66/1999 on Romania’s accession to the Convention on the Abolition of the Requirement of Superscription for Foreign Official Documents, adopted at The Hague on 5 October 1961, approved by Law No. 52/2000, as subsequently amended, or in other treaties, conventions or any other form of international, bi- or multilateral agreement to which Romania is a party.

The foreign procedure will be recognized to the extent that it meets the following conditions:

• there is a foreign procedure;
• there is a foreign representative seeking recognition;
• the request for recognition fulfills the conditions for submission;
• the request for recognition has been lodged with the competent court; and
• there is reciprocity in the effects of foreign judgments between Romania and the state of the court that delivered the judgment.

An application for recognition of foreign proceedings shall be dealt with expeditiously and expeditiously. The court shall, after summoning the parties, decide on the application for recognition by a judgment that may be appealed against.

The judgment recognizing the foreign proceedings shall have the authority of res judicata; the court may set it aside or, as the case may be, set it aside in its entirety if it is established after the judgment has been given that the grounds and conditions for recognition were wholly or partly lacking or no longer exist.

However, these rules are not applicable in cases that fall within the scope of Council Regulation (EC) no. 1346/2000 (the Insolvency Regulation) abolished by the (EU) Regulation No. 2015/848, which is directly applicable in Romania, or where an international treaty applies.

UNCITRAL Model Laws

53. Have any of the UNCITRAL Model Laws on Cross-Border Insolvency been adopted or is adoption under consideration in your country?

The UNCITRAL Model Law on Cross-Border Insolvency has been adopted by the Romanian insolvency law.

Foreign creditors

54. How are foreign creditors dealt with in liquidations and reorganizations?

Foreign creditors have the same rights and status as domestic creditors.

Cross-border transfers of assets under administration

55. May assets be transferred from an administration in your country to an administration of the same company or another group company in another country?

The Romanian insolvency law does not provide such an option.

COMI

56. What test is used in your jurisdiction to determine the COMI (center of main interests) of a debtor company or group of companies? Is there a test for, or any experience with, determining the COMI of a corporate group of companies in your jurisdiction?

The center of the debtor’s main interests in insolvency proceedings with a foreign element is, until proven otherwise, as appropriate:

• the registered office of the legal person;
• the place of business of the natural person pursuing an economic activity or a self-employed profession; and
• the domicile of the natural person who is not engaged in an economic activity or self-employed profession.

Cross-border cooperation

57. Does your country’s system provide for recognition of foreign insolvency proceedings and for cooperation between domestic and foreign courts and domestic and foreign insolvency administrators in cross-border insolvencies and restructurings? Have courts in your country refused to recognize foreign proceedings or to cooperate with foreign courts and, if so, on what grounds?

Yes, the Insolvency Law comprises an entire title regarding the cross-border insolvency and the recognition procedure of foreign proceedings.

The Romanian courts may refuse recognition of foreign proceedings, the enforcement of a foreign court judgment adopted in such proceedings, judgments arising directly out of and in close connection with insolvency proceedings, or the grant of any other relief provided for in the Insolvency Law, only if:

• the judgment is the result of fraud committed in proceedings abroad; and
• the judgment violates the public policy provisions of Romanian private international law.

Also, violation of legal provisions shall constitute grounds for refusing recognition. In practice, there are limited cases where such refusal may occur.

Cross-border insolvency protocols and joint court hearings

58. In cross-border cases, have the courts in your country entered into cross-border insolvency protocols or other arrangements to coordinate proceedings with courts in other countries? Have courts in your country communicated or held joint hearings with courts in other countries in cross-border cases? If so, with which other countries?

Unfortunately, a centralized database of such situations does not exist.

Winding-up of foreign companies

59. What is the extent of your courts’ powers to order the winding-up of foreign companies doing business in your jurisdiction?

The Romanian courts may order the liquidation of the assets only if the foreign legal person has a legal headquarters in Romania, the mere location of the goods on the Romanian territory not being sufficient. However, the courts can enforce the liquidation decision issued by the foreign state.

UPDATE AND TRENDS IN RESTRUCTURING AND INSOLVENCY IN ROMANIA

Trends and reforms

60. Are there any emerging trends or hot topics in the law of insolvency and restructuring? Is there any new or pending legislation affecting domestic bankruptcy procedures, international bankruptcy cooperation or recognition of foreign judgments and orders?

The amendments of Law No. 85/2014 from July 2022 brought by Law No. 216/2022 include the following: the introduction of a new pre-insolvency procedure (the preventive restructuring agreement) and a substantial modification of the composition procedure; early warning by means of an alert notification sent automatically via the electronic remote communication system; dedicated electronic platform supporting the insolvency prevention procedures; electronic means of remote communication regarding the creditors’ assemblies or committees; filling the claims by electronic means to the court and/or to the insolvency administrator; and an electronic platform for selling the assets.

Law No. 220/2022 on the adapted use of measures was proven to be of benefit to justice institutions established during the state of alert declared to prevent and combat the effects of the covid-19 pandemic as follows:

• the opening of the insolvency procedure becomes an option available, and not a legal obligation of the debtor who is in a state of insolvency on the date of entry into force of this law or who becomes insolvent within a period of one year from the date of entry into force of this law, the first day following this period being the date on which the legal 30-day period begins to run; and
• in the case of debtors who file an application for the opening of insolvency proceedings within a period of one year from the date of entry into force of this Law, which application is admitted by the competent court, the initial period of execution of the reorganization plan, may be four years, with the possibility of extension, without exceeding a total duration of the plan execution of five years, and of modification of the reorganization plan, accordingly.

* The information in this chapter was accurate as at November 2023.

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“The article’s content refers to the regulations that were applicable at the time of its creation and is intended solely for reference purposes. To obtain accurate information, it is advisable to seek the guidance of a consulting lawyer.”

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• Address: B23 Nam Long Residential Area, Phu Thuan Ward, District 7, Ho Chi Minh City, Vietnam