Who is who in restructuring and insolvency proceedings part 1

Participation in insolvency or restructuring proceedings requires commitment, knowing one's obligations and the tools available to fulfil them. One of the basic principles of law states "ignorantia iuris nocet" Which means 'ignorance of the law harms'. Therefore, with this article we would like to start a series in which we will gradually introduce our readers to who is who in restructuring and bankruptcy proceedings.

Administrator of the sanctioning body

One type of restructuring proceedings is the sanctioning procedure. The sanitation proceeding is the most extensive of all restructuring proceedings.

Characteristic of this type of behaviour is:

• loss by the debtor's person of the right to manage the property himself (although our law firm is increasingly succeeding in persuading the courts to depart from such radical decisions)
• implementation of sanitation measures, leading to a comprehensive and profound reengineering of operational activities

In sanitation proceedings, unlike in other types of restructuring proceedings, the court appoints an administrator and not a court supervisor. It is the administrator - as the name suggests - who takes over the management of the Debtor's business and ensures that the purpose of the proceedings, i.e. the conclusion of an agreement with the creditors as well as the improvement of the company's asset situation, is achieved thanks to the tools provided by the Restructuring Law.

Ponieważ rola zarządcy jako osoby zarządzającej restrukturyzowanym podmiotem jest czasowa (przez okres trwania postępowania restrukturyzacyjnego) dlatego nasza kancelaria zawsze rekomenduje ścisłą współpracę zarządcy z zarządem restrukturyzowanego podmiotu. Wypracowanie metodologii współpracy pomiędzy zarządcą i zarządem jest często kluczowym elementem sukcesu każdej restrukturyzacji.

The administrator of the sanctioning body is a non-judicial body of the sanctioning proceedings appointed by a court decision to open the sanitation proceedings. Simultaneously with the opening of the proceedings and the appointment of the administrator, the Court shall deprive the Debtor of the management of the company, unless special cases apply when, in order to achieve the purpose of the proceedings, actions of the Debtor or persons representing the company are required. In such cases, the Court may allow such persons to represent the company, to the extent not exceeding the ordinary management.

Zarządcą w postępowaniu sanacyjnym może być osoba, która posiada licencję doradcy restrukturyzacyjnego, and in the case of commercial companies, a company whose partners bearing liability for the company's obligations without limitation with all their assets or members of the management board representing the company are licensed as restructuring advisors. It should also be noted that in the case of large entrepreneurs, i.e. entrepreneurs who in at least one of the last two financial years:

• employed on average 250 or more employees per year or
• have an annual net turnover from sales of goods, products and services and financial operations exceeding the PLN equivalent of EUR 50 million, or
• have total assets in their balance sheet as at the end of one of those years that exceeded the PLN equivalent of EUR 43 million.

Given the level of complexity of the cases and the size of the company, the Court shall appoint the administrator from among persons holding the title of qualified restructuring adviser.

In addition, only a qualified restructuring adviser can be an administrator in the case of a sanctioning:

• a company of significant importance for the state economy, included in the list specified in the executive regulations issued on the basis of the Act on principles of state property management;
• entrepreneurs carrying out tasks for the Armed Forces as referred to in the Homeland Defence Act.

In addition, the Court, when appointing a sanctioning trustee, always takes into account the number of cases in which the person holding a licence as a restructuring adviser acts as a court supervisor or administrator in other restructuring proceedings or as an administrator in bankruptcy proceedings, as well as his or her experience and additional qualifications.

Pursuant to the provisions of the Restructuring Law, the administrator in sanctioning proceedings:

• immediately takes over the management and administration of the sanitation mass;
• draw up an inventory with an appraisal;
• draws up and implements a restructuring plan;
• evaluates the composition proposals submitted;
• takes steps to ensure that as many valid votes as possible are submitted by creditors;
• participates in the creditors' meeting;
• submits an opinion on the feasibility of the arrangement.

Mając na uwadze powyższe trudno więc zaprzeczyć faktowi, iż zarządca w sanitation proceedings pełni kluczową funkcję. The administrator in the Sanation Proceedings should first take over the management of the sanation mass. This means that immediately after the opening of the proceedings, i.e. the issuance of the order opening the sanitation proceedings, the administrator shall step into the place of the management and manage it on behalf of the debtor. Taking over the administration is the first and extremely important duty of the administrator and this should be done as soon as possible. For the first stage of the sanitation is to secure the debtor's assets against their unauthorised disposal for the benefit of third parties - which in itself could effectively frustrate the conduct of the proceedings.

After taking over the administration of the bankruptcy estate, the administrator should draw up an inventory with an appraisal. This means that the administrator shall make an inventory of all the property and rights constituting the debtor's assets. Once the inventory has been drawn up, the administrator proceeds to prepare and then implement a restructuring plan, i.e. a kind of timetable of actions during the sanitation proceedings, but also after the completion of the proceedings themselves.

At this point, it is important to emphasise once again, that close cooperation with the management board of the entity being restructured is extremely important for a positive outcome of the sanitation procedure. It should be borne in mind that, on the one hand, pursuant to the provisions of the restructuring law, the restructured entrepreneur is obliged to provide the administrator with full and truthful information related to the conducted business. On the other hand, the administrator is obliged to undertake actions which should be characterised by high professionalism and know-how. Without the cooperation of the management and the trustee, the rehabilitation - as well as other types of restructuring proceedings - have no chance of success.

In summary, the administrator has a key role in sanctioning proceedings. To zarządca wraz z zarządem, w trakcie trwania postępowania zarządza majątkiem przedsiębiorstwa i jest odpowiedzialny za przygotowanie kluczowych dokumentów, które pozwolą na przeprowadzenie postępowania, zawarcie układu z wierzycielami oraz – co stanowi podstawowy cel każdego restructuring proceedings – poprawę kondycję przedsiębiorstwa i ochronę przed upadłością. Nie sposób jest nie zauważyć, że bez osoby zarządcy postępowanie sanacyjne nigdy nie osiągnęłoby zamierzonych skutków, dlatego tak istotnym jest wybór odpowiedniej osoby.