The normative act that regulates the procedure necessary for covering the liabilities of insolvent debtors through either reorganization of the entrepreneur and its activity, the liquidation of certain goods in the patrimony of the same up to the liquidation of the liabilities or through bankruptcy, is Law no. 85/2006 regarding the insolvency procedure published in the Romanian Official Gazette no. 359 from April 21, 2006 with its further amendments. This normative act, which integrally supersedes the old regulation enacted back in 1996, is in harmony with the E.U. solvency procedures, by introducing an accelerated and simplified procedure which leads to the expel of insolvent debtors from the judicial and economic circuit, thus contributing at the improvement of the business environment.

 

Economic operators subject to the procedure

The procedure implemented by Law no. 64/1995 applies to any of the following categories of individuals or legal entities that are in a state of manifest inability to pay their due debts with the available cash amounts, i.e. state of insolvency, such as:

• companies;
• consumers` co-operative companies and co-operative organizations;
• individuals acting individually or within family associations (simplified procedure);
• agricultural companies;
• groups of an economic interest;
• any other private law legal entity that carries out economic activities.

Conditions for demanding the commencement of the procedure

The commencement of the procedure provided for by Law 85/2006 is made pursuant to the admission by the syndic judge appointed by the competent tribunal, of the writ of summons filed by:

• the debtor,
• any of the debtor`s creditors.
• any other person or entity specially provided by the law.

The law obliges the debtor that is in a state of insolvency to submit an application for the commencement of the procedure to the tribunal, within 30 days following the occurrence of the state of insolvency.
In the case of the debtor for whom insolvency is imminent, such debtor shall have the right, but not the obligation, to file said writ of summons.
The early submission of the writ of summons, as well as the submission in bad faith or with delay by the debtor of an application for the commencement of the procedure, shall result in the patrimonial liability of the debtor who is an individual or of the statutory representatives of the debtor legal entities, for the prejudices caused. Through his writ of summons, the debtor may choose to be subject to the simplified procedure that implies that the bankruptcy procedure is directly applicable.

 

Any creditor that has a claim, which is certain (the existence of which is doubtless), liquid (which has a definite or at least determinable amount), due (which has reached the due date and the enforcement of which may be requested) since more than 30 days and having a value exceeding RON 10,000 (for the creditors in their capacity of employees the value is that of 6 minimum wages) may file with the tribunal an application against a debtor who/which is presumed to find himself in insolvency.

 

As an effect of the commencement of the insolvency procedure, the judicial administrator or liquidator (for the simplified procedure) shall send a notification to the debtor/ creditor, as to the trade registry office or any other registry where the debtor might be registered. This notification will also be published in a large circulation newspaper as well as in the Insolvency Procedure Gazette, official publication that facilitates the summon or convening procedures and any documents subpoena performed simultaneous with the parties individual summon procedure.
On the date of commencement of the procedure, one shall suspend by law all court or extra-court actions for the achievement of the claims over the debtor or the debtor`s assets. Also, at the same time, any interest, penalty for late payments or any other penalty deriving from debts to be claimed before the commencement of the insolvency procedure are not accruing anymore and the debtor`s social shares can no longer be sold on the stock exchange market until the confirmation of the reorganization plan.
Also, the debtor has no longer the right to administrate his assets, except for the case when he announced his intention to reorganize the company and carries on with its activity; the company`s administrators are forbidden to assign, without the approval of the syndic judge, their shares or social parts held by the debtor representing the object of the procedure. The syndic judge decides upon the blocking of the shares or social parts in the special recording register or the electronically registered accounts.
After the resolution for the commencement of the procedure is deemed final, all documents and correspondence issued by the debtor, administrator or liquidator shall include, obligatorily and in visible fonts, in Romanian, English and French, a mention reading "in a state of insolvency."
Two procedures may be commenced pursuant to the admission of a writ of summons: judicial reorganization and bankruptcy.
Judicial reorganization is decided in the event that after the commencement of the procedure and the finding of the state of insolvency one approved a plan for the reorganization of the debtor`s activity in view of the economic recovery of the debtor and the full satisfaction of the creditors` claims. By means of the sentence regarding the commencement of the reorganization procedure, the syndic judge shall appoint an administrator and shall set out the duties and the remuneration of the same.
Should the company`s reorganization fail to be achieved, the debtor chose the direct bankruptcy simplified procedure or the judicial administrator`s plan proposing the application of the bankruptcy procedure was approved, the syndic judge shall decide upon the commencement of the company`s liquidation procedure.
Through the conclusion deciding on the commencement of bankruptcy procedures, the syndic judge shall pronounce the dissolution of the debtor company and it shall resolve upon the following:

• annulment of the debtor`s right of administration;
• appointment of a temporary liquidator (in case of general procedure), as well as the setting of the liquidator`s duties and remuneration of the same according to criteria established by government decision;
• confirmation of the judicial administrator in capacity of liquidator (in case of simplified procedure);
• the maximum term for the transfer of the administration of the property from the debtor/administrator to the liquidator (in case of general procedure) , together with the list of documents and operations carried out after the commencement of the procedure;
• drafting and delivery to the liquidator, within a maximum of 10 days following the commencement of the bankruptcy procedure, of a list including the names and the addresses of the creditors and all of the claims thereof as of the date of commencement of the bankruptcy procedure, and pointing the claims that occurred after the commencement of the procedure; and
• notification of the commencement of the bankruptcy procedure.

The syndic judge, through the judicial liquidator, shall also decide upon taking insuring measures and measures for preservation of the debtor`s assets to undertake the judicial liquidation.
The entire procedure for the liquidation of the debtor`s assets is carried out under the control of the syndic judge who supervises the activity of the judicial liquidator and takes the steps necessary to determine the amounts of the claims, the sale of the debtor`s assets and the distribution to the creditors of the amounts resulting from the liquidation.

 

In case that during any stage of the insolvency procedure, it is ascertained that there are not enough assets in order to cover all administrative costs and no creditor makes advance payments for this purpose, the syndic judge may resolute upon the closing of the procedure followed by the writing-off of the company.
The reorganization procedure is closed through a sentence, once all payment obligations assumed in the confirmed schedule have been fulfilled.
Once the liquidation stage is reached, the bankruptcy procedure shall be closed when the syndic judge approves the final report, when all of the debtor`s funds and assets are distributed and when the unclaimed funds are deposited with the bank. Pursuant to an application from the liquidator, the syndic judge shall render a sentence, closing the procedure and ordering the annulment of the company, as the case may be.

 

The international private law relations are regulated by Law 637/2002, the scope of which includes:

• the cases where a foreign court or a foreign representative seeks assistance in Romania with respect to a foreign insolvency procedure;
• the cases where assistance is sought in a foreign state with respect to a procedure that is performed in accordance with Law no. 85/2006 regarding the insolvency procedure;
• the cases of concomitant performance of a Romanian insolvency procedure and a foreign insolvency procedure with respect to the same debtor;
• the cases where the debtors or other interested persons in a foreign state are seeking the commencement of the procedure provided for under Law no. 85/2006 in Romania or to take part to a already commenced insolvency procedure.

The Law sets out the right of direct access of foreign representatives (individuals or legal entities, including the persons appointed on a temporary basis, who are authorized, within the framework of a foreign procedure, to manage the reorganization or the liquidation of the debtor`s goods and activity or to act as a representative of a foreign procedure) to the Romanian courts.

The foreign procedure represents the judicial or the administrative procedure, carried out in accordance with a foreign state`s relevant legislation on insolvency, including the interim procedure, where the debtor`s goods and activity are subject to the control or the supervision of a foreign court, for the purpose of such debtor`s activity`s reorganization or liquidation.

Therefore, the foreign representative, legal or natural person, authorized in o foreign procedure to administrate to reorganization or the liquidation of debtor`s assets and activity or to act as a representative of a foreign procedure, holds an active procedural capacity to file a claim for the commencement of the procedure, in accordance with the provisions of Law no. 85/2006, if all other requirements necessary for the commencement of such procedure are met according to Romanian law. At the same time, the foreign representative may participate in an already commenced procedure according to Law 64/1995.

In order to capitalize upon the rights provided for under Law 637/2002, the foreign representative shall file before the Romanian court a claim for the acknowledgment of the foreign procedure in which the respective representative was designated.

As an effect of the acknowledgment of the foreign procedure, the following shall be rightfully suspended: (i) the claims or the legal actions of an individual nature, related to goods, rights and obligations of the debtor, (ii) the deeds, operations and any other measures of individual enforcement over the debtor`s goods, and (iii) the debtor`s right to assign, encumber or dispose in any other way of its own goods, subject to nullity.

Similarly to the rights acknowledged by the law for the Romanian creditors, as of the date of acknowledgement of the foreign procedure, the foreign representative may choose to file claims for the annulment of the judicial acts concluded by the debtor to the detriment of its creditors.

Law 637/2002 sets out special rules regarding insolvency-related relations with the states that are members of the European Union, with a reference to the acknowledgment procedure, the third parties` real rights, compensation, the reserve of the ownership right, payment systems and financial markets, work relations, industrial property rights, etc. It is noteworthy that the resolutions regarding the commencement of an insolvency procedure, adopted by courts of a member state, are acknowledged in the other member states without the need for any additional formality.