Insolvency Law amended in second package of Government reforms

The Justice Ministry announced on Thursday having developed in cooperation with the Finance Ministry and the National Tax Administration Agency a set of proposals to amend the Insolvency Law, which will be included in the second reform package.Some of the amendments provide for a higher recovery rate of the taxes and fees owed by insolvent companies and for a cut in the duration of the insolvency procedure, the Justice Ministry said in a release."Insolvency procedures ensure the orderly liquidation or restructuring of enterprises or entrepreneurs in financial and economic difficulty, and the balanced regulation thereof - under consideration of all competing rights and interests - is key for the assessment of the investment risk and for maintaining a healthy and credible economic climate. For these reasons, streamlining insolvency and insolvency prevention procedures has been a permanent concern of the national authorities," the release states, noting that a major goal is that of reducing the VAT gap by creating the legal framework for introducing the accountability of judicial administrators who deliberately drive tax-owing SMEs into insolvency and then into bankruptcy, if their debts-to-total assets ratio is higher than 50%.The Justice Ministry mentions that a phased legislative intervention on Insolvency Law No. 85/2014 is envisaged, with the aim of streamlining procedures and increasing the collection degree of state receivables, thus contributing to reducing the budget deficit.The solutions proposed for achieving these goals include: strengthening the regime of administrators' liability for bringing the company into insolvency (including the prohibition to set up companies for a period of 5 years following the decision to attract liability, a prohibition that shall be also recoded in the Trade Register); increasing the recovery rate of taxes and fees owed by insolvent companies, by ensuring a higher transparency of the procedure in relation to creditors, so as to facilitate the exercise of procedural remedies against vote manipulation practices and attempts to delay the procedure; the reduction of the duration of the insolvency procedure through concrete measures such as the periodic verification by the judicial administrator of the debtor's financial situation, in order to immediately propose, if necessary, the entry into bankruptcy, the sale of assets by public auction - according to the Civil Procedure Code - if no sale can be perfected within a specified period according to the sales regulations established by the creditors; closing the insolvency procedure once the insolvency judge ascertains that all payment obligations pledged under the confirmed plan have been met.