ROMANIA. By Justice Edita Lovin

Transcription

1 THE WORLD BANK GLOBAL JUDGES FORUM COMMERCIAL ENFORCEMENT AND INSOLVENCY SYSTEMS MAY 2003 PEPPERDINE UNIVERSITY SCHOOL OF LAW MALIBU, CALIFORNIA ROMANIA By Justice Edita Lovin TABLE OF CONTENTS PAGE NO 1.0 INTRODUCTION AND OVERVIEW LEGAL FRAMEWORK FOR CREDITOR RIGHTS LIQUIDATION REHABILITATION/COMPOSITION/SCHEMES INSTITUTIONAL FRAMEWORK FOR INSOLVENCY REGULATORY FRAMEWORK FOR INSOLVENCY CROSS-BORDER INSOLVENCY PROPOSED OR PENDING LEGISLATION

2 CREDITOR RIGHTS AND INSOLVENCY SYSTEMS ROMANIAN REPORT 1.0 INTRODUCTION AND OVERVIEW After more than a hundred years practice of a pro-creditor legislation in bankruptcy field including fifty years unrecognized insolvency statute during the centralized economy, Romania has decided to improve this insolvency regulation by adopting Law 64 regarding reorganization and liquidation in An important modification in the creditor rights and insolvency regime was made in 1999 when the secured interests law was substantially changed and the jurisdictional prerogatives of the syndic judges were clearly separated from the administrative activities in bankruptcy process by the Law 99/ A new step of the reform took place in 2003 when Ordinance 38/2002 2, which regulates precisely the insolvency definition under the influence of the practitioners 3, was adopted as a law and when the law regarding cross-border insolvency 4 was approved like an application of the UNCITRAL model law and the European regulation. The current regulation in Romanian insolvency field provides the general application of the Law 64/1995 to the traders: commercial companies, organizations of the cooperative type, individual traders. There are special proceedings for the insolvency of the banks 5, financial and insurance companies, but not for the consumers, farms, municipals. Airlines, railroads and vessels can be the object of the general insolvency regulation but only shipping companies were liquidated in this procedure. The competence of the insolvency procedure belongs to the court where the debtor has the main registered office and the prerogatives are accomplished by the syndic 1 Title II and IV from the Law 99 regarding the acceleration of the reform 2 Law 82 from 26 March 2003 regarding the amendment and the completion of the Law 64/ The improvements in Romanian Bankruptcy field Eurofenix, May Law 637 from 19 December 2002 regarding the regulation of the private international law reports in insolvency mater 5 Law 83 from 22 April 1998 amended through the Ordinance 138/2001 and the Law 597/2002 2

3 judge. Other specialized authorities implement the administrative activities. There are not bankruptcy specialized courts or judges in Romanian judiciary system. A. Secured Claims and Enforcement Trying to reduce the risks of debtor s insolvency, creditors secure their claims using, in the Romanian judiciary system, real securities like the mortgage and the pledge or personal securities like the guaranty/surety. Most of the loans for businesses are secured; usually a single secured transaction is joined by several types of securities. The mortgage is settled by the Civil Code in title IV, chapters III-VIII (art ), the pledge has now a modern regulation from title VI of the Law 99/1999 regarding the acceleration of the reform. This regulation simplifies the creating and enforcing procedure of the pledge and improves the registering system by using a new, electronic archive of the pledges. The guaranty is regulated in title XIV of the Civil Code (art ). The solidarity of the surety with the debtor is settled by art. 42 of the Commercial Code. A creditor secured with a mortgage can foreclosure the collateral regardless of whom hold its and the creditor will realize his secured right preferential towards other creditors. The claim secured with a pledge gives the right to the creditors to realize his claim on the collateral preferential towards any unsecured creditor or towards other secondary ranked. According to the new regulation, a creditor secured with a pledge can, in order to enforce his security, choose the enforcement procedure provided by the Code of Civil Procedure (art ) or choose the new procedure provided by the Law 99/ In the latter procedure, a take over of the asset is possible in an extrajudicial formula. If the voluntary delivery is not possible, a banking or judicial enforcement body can be used. At the moment, the judicial executors activities belong to the judicial system, meaning that a judicial procedure is applied but the services are externalized. 6 Title VI, chapter V, art from the Law 99/1999, regarding the acceleration of the reform 3

4 Generally, the process of creating, registering and enforcing collateral tends to be come more effective. B. Unsecured Claims and Enforcement The unsecured creditor of a business can collect his claim that is overdue based on the general pledge on all the debtor s movable or immovable/ present or futures assets (art Romanian Civil Code) if there are not mortgage or other secured creditors. The way to enforce such a claim is a lawsuit. If the claim is not contested by the debtor, the suit can last for 3-6 months and the costs are around 5% from the claim value. If the claim is disputed by the debtor, the suit will last longer, the length is hard to be predicted considering the fact that the number of procedural incidents can rise, appeals procedures are added to the first instance suit and also the costs will raise too about 15% (the enforcement taxes plus the lawers fees). C. Liquidation The judicial liquidation is the most frequent manner to settle the Romanian insolvency cases. The liquidation of an insolvent business can be achieved by a non-judicial proceeding too, which applies to companies which are privatized 7. Most of the private businesses are liquidated in a judicial proceeding if an enforcement (foreclosure) procedure for budgetary claims had not been opened before and if the value of the debtor s assets is not smaller than the budgetary value of the claims. Typically the creditors commence a liquidation procedure and especially the secured creditors. The debtors prefer the voluntary solvent liquidation procedure regulated by the Law 31/1990 8, which is a non-judicial liquidation. There is not a uniform regulation applicable to the liquidation. The Civil Procedure Code 9 and other special procedures provided in special laws are applied in the auctions matter. 7 The Government Emergency Ordinance no.88/1997,modified by the Law 137/ Modified and republished in

5 Romania is not a federal state and for this reason, the laws which apply to liquidations are stat laws. The fiduciaries that control and oversee the liquidation process are: the syndic judge the liquidator (a trustee), the creditors (as the creditors assembly or as the creditor committee) in the judicial procedure; the liquidator is the fiduciary for the nonjudicial procedure. In the non-judicial voluntary procedure, the nomination of the liquidator is done by the share-holders or by the state authority involved in the privatization process; the creditors do not have a very active role in this procedure. In the judicial liquidation procedure the nomination of the liquidator is done by the syndic judge with the creditor s agreement. D. Reorganization The judicial reorganization is not used very often in Romania but it benefits from much more accurate regulation in the Law 64/1995, even if has few articles. The regulations regarding reorganization are not provided by a code because there are only a few laws in bankruptcy field. Most frequently reorganization is commenced by the debtor and supported by the unsecured creditors. The fiduciaries involved in the control and overseeing of the reorganization are the syndic judge, the administrator nominated by this judge with the creditors agreement. E. Non-Bankruptcy Workouts and Restructurings The non-judicial restructurings are implemented like pre-privatization stage able to make companies more attractive to privatize. A special administration and accurate restructuring methods like mergers, workouts with/without layoffs, externalizing/transfer of activities are basis in non-judicial restructurings LEGAL FRAMEWORK FOR CREDITOR RIGHTS 2.1. Creation and Enforcement of Security in Real Property The main securities in real property are the pledge and the mortgage. 9 Art Romanian Civil Procedure Code 10 Art. 16, paragraph 4 from the Law 137/2002 5

6 The regulation of the pledge is found in Title VI of the Law 64/1999 and of the mortgage in the Civil Code. A. The commercial pledge/lien is a real movable security which is constituted by a certified contract in front of a notary or just signed by the debtor 11 and regards an asset. The collateral must be described in the contract 12. The description can be generic (all the movable assets) or particular (each object, number bank account). The creation of a lien can be achieved through the taking over of the owner s asset or not 13. The lien of the movables (e.g. shares/ issue) will be realized through their inalienability. The lien contract is an executory title: a formal judicial recognition is not required 14. Letting the third parties know and establishing a priority rank are obtained by registering the financing statement in the Electronic Archive of Movable Real Securities. The date of registering is the moment of informing the third parties about the pledge 15. The enforcement When the voluntary handing over possible, the creditor can take over the collateral with the help of judicial or bank executor. The enforcement authority will take over the collateral within 48 hours since the creditor s requirement 16 ; the authority will hand it over to the creditor immediately. The sale of the collateral can be done according to the contract. If there are no clauses regarding the sale techniques, in the contract, the creditor may sale the asset in a reasonable commercial manner, in order to obtain the best price. The sale methods are: the direct sale to the third party; public auction announced in a news-paper; the sale on public market Art. 13, paragraph 1 and Art.14 of Title VI of Law 99/ Art. 9 of Title VI of the Law 99/ Art. 9, paragraph 3 of Title VI of Law 99/ Art 17, paragraph 3 of Title VI of Law 99/ Art 32-38,from Chapter II, Title VI of Law 99/ Art. 63 from Chapter II, Title VI of the Law 99/ Art. 68 from Chapter II, Title VI of the Law 99/1999 6

7 The sale is notified to the debtor and to the other creditors who have registered a financing statement regarding the same debtor and the same asset; in case the debtor is not the owner of the asset, the actual owner of the asset is also notified. The notification must be sent 5 days before the sale and it must mention the time and the place for the sale and the circumstances of the sale 18. Within 5 days since the notification is received, the debtor, another creditor or the owner of the asset can attack the sale of the collateral with an opposition. The court will settle the opposition within 3 days; the decision can be appealed within 3 days since the communication of the decision and the enforcement is not suspended by the introducing of the appeal 19. The creditor can not adjudicate the asset for himself without having given the possibility to the third parties to bid, unless there has not been a different agreement 20. The rank of the sums distribution (the sale of asset) is established by art. 78, paragraph 1 of the Law 99/1999: a) the expenses for maintaining, preserving, taking over and sale of asset; b) the payment of the interests and of the secured claim which has the first priority rank, even if the claim is not overdue. The creditor and the debtor can not established another destination for the sums of money; their agreement would be canceled 21 The creditor and the debtor can not interfere to change the priority rank 22. If the sums of money obtained form the sale is not enough to pay the entire secured claim, the debtor is not discharged for the rest of the payment, but this creditor will be paid for this rest as an unsecured creditor 23. There are specific rules for the enforcement of a bank account 24, of marketable securities 25. When the security operation has a foreign origin, the rules are established by Chapter VI, Title VI of the Law 99/1999. B. The mortgage is an immovable real security without dispossession. 18 Art. 71, paragraph 2, Title VI of the Law 99/ Art. 75, paragraph 1 and 2, Title VI of the Law 99/ Art. 73, Title VI of the Law 99/ Art. 78, paragraph 4, Title VI of the Law 99/ Art. 79, Title VI of the Law 99/ Art. 74, Title VI of the Law 99/ Art , Title VI of the Law 99/ Art. 83, Title VI of the Law 99/1999 7

8 There are legal mortgages 26 and other mortgages established by a contract 27. The legal mortgages are not usually used in the commercial law, while the contractual mortgages are much more used to secure the payment of a commercial claim. The creation of a contractual mortgage is achieved only by a certified contract in front of a notary; this form is required for the validity of the security 28. The collateral can be only an immovable asset and a mortgage can not be created for the future assets 29. The collateral must be described at the moment of the creation of the mortgage. The description also regards the value of the secured claim (the mortgage is a specialized security 30 ) In order to let the third parties know, the mortgage must be registered in a special register regarding the transfers of the immovable properties and the burdens. The registering ensures the rank of the mortgage too 31. The enforcement of the mortgage is realized by the sale of the immovable asset according to the rules provided by the Civil Procedure Code Security in Personal Property The guaranty is the usual form of the securities in personal property. It has same varieties such as: the guaranty of a bill of exchange or of a promissory note, letter of intention, independent guaranties, co-debtors several covenants. Only a part of all these are regulated and same of them are recognized and applied. The guaranty is a one-sided contract, in which, only the fideiussor/ surety is obliged towards the creditor. The act should not be certified but the fideiussor s obligation must be specified 33. The guaranty is given as a gift and can be cancelled if it is created in the suspect period 34. The purpose of the guaranty must be determined previous and liabilities can be determinable. A guaranty can be given for an exact amount of money or unlimited. 26 Art. 1749, paragraph 1, Romanian Civil Code 27 Art. 1749, paragraph 2, Romanian Civil Code 28 Art Romanian Civil Code 29 Art Romanian Civil Code 30 Art and 1776 Romanian Civil Code 31 Art Romanian Civil Code 32 Art Romanian Civil Procedure Code 33 Art from the Romanian Civil Code 34 Art. 45, paragraph 1, letter c from the Law 64/1995 re-published 8

9 The period of time for which is granted can be determined or unlimited. The enforcement of the guaranty is realized after a lawsuit in which the fideiussor and the debtor he guaranted for, were sued Unsecured Claims Unsecured claims bear the risk of insolvency and the risk of discharge of debts. These claims are infrequently paid. The creditors general pledge 36 insures only a vocation to take part in the distribution process of the sums of money obtained after the enforcement. The distribution of the sums of money is proportional to each claim in the debtor s liabilities 37. The order of distribution of the unsecured claims, for insolvency cases, is provided by the law 64/ LIQUIDATION 3.1. Principal Laws Governing Liquidation The liquidation for the insolvency reason develops in a judicial proceeding based on Law 64/ and on Law 83/1998 (in the case of bank bankruptcy) or it develops in a non-judicial proceeding based on Law 31/ and on the Law 137/2002 which provides special rules for the owner state companies that are in the privatization process Courts Which Administer Liquidation The judicial liquidation is administered by tribunals and appeal courts. All the activities regarding liquidation are implemented, in the first instance, by the tribunal, acting through the syndic judge. The appeals against the syndic judge s decisions are judged in the courts of appeal. 35 Art. 42, paragraph 2, Romanian Commercial Code 36 Art Romanian Civil Code 37 Art Romanian Civil Code 38 Art. 108 from the Law 64/1995, modified by the Government Ordinance no. 38/ Section VI, Chapter III, Law 64/ Art from the Law 31/1990, re-published in

10 Territorial jurisdiction is exclusive and it belongs to the tribunal from the debtor s office 41 as it is registered in the Trade Register Commencement of a Liquidation The cases of the opening a liquidation are the following: A. a) the debtor stated his intention of opening a liquidation or did not state a reorganization intention and b) none of the entitled parties proposed a reorganization plan or none of the proposed plans was accepted or confirmed; B. a) the debtor stated his reorganization intention but he did not propose a reorganization plan or the proposed plan was not accepted or conformed and b) none of the entitled parties proposed a reorganization plan or none of the proposed plan was accepted and confirmed; C. The liabilities and the other burdens are not accomplished under the circumstances established in the confirmed plan or the continuation of the debtor s activities during the reorganization brings losses to his assets Parties to a Liquidation The participants in a judicial liquidation procedure are: the debtor, the creditors meeting, the creditors committee, the liquidator. The syndic judge controls the entire liquidation procedure, fulfilling mainly jurisdictional attributions and the liquidator fulfills the administrating attributions of the liquidation Liquidation Estate The assets that form the debtor s estate are sealed and taken into an inventory by the liquidator in the presence of the debtor Art. 6 and 7 from the Law 64/ Law 26/1990 regarding Trade Register 43 Art from the Law 64/1995 modified by the Government Ordinance no. 38/ Art. 23, Law 64/1995, re-published in Art. 82 from the Law 64/1995 modified by the Government Ordinance no. 38/

11 There will be sealed: stores, ware-houses, offices, commercial correspondence, and archive, electronic devices for stocking data, contracts, goods and any other movable assets belonging to the debtor estate 46. There will be not sealed: the objects which have to be immediately sold in order to avoid their material deterioration or diminishing their value; account books, bills of exchange and other due marketable securities or about to become due in a short time, shares and any other titles which will be taken by the liquidator to be cashed or preserved; the cash which will be deposited in a bank in the debtor s estate account 47. The assets listed in the inventory are taken by the liquidator who becomes their judicial depositary 48. As the inventory operation develops, the liquidator takes the necessary preserving measures for the assets belonging to the estate of the liquidation Administrative Powers When the liquidation opens, the debtor loses the right to administrate the estate. This is a decision taken by the syndic judge 49. The right to manage the activities, to administrate the estate and to be able to sale the assets of this estate are transmitted to the liquidator. Losing the right to administrate regards: the assets of the debtor estate, the debtor s judicial acts and his judicial actions Creditors and Claims The notification of the creditors mentioned in the list which the debtor is obliged to register, is done immediately after the opening of the procedure 50. The notification will include: the deadline (which is maximum 60 days since the opening of the procedure) to register the application for the admission of the claims and the conditions of validity for the claims 51. The claims are registered in a specific register kept at the clerk office in the tribunal. The claims will be examined and the preliminary list of the creditors will be created within 30 days since the term of the registering the claims expired. 46 Art. 81, paragraph 1 from the Law 64/1995, modified by the Government Ordinance no. 38/ Art.81, paragraph 2 from the Law 64/1995, modified by the Government Ordinance no. 38/ Art. 82, paragraph 2 from the Law 64/1995, introduced by the Government Ordinance no. 38/ Art.77.2, letter a from the Law 64/1995, modified by the Government Ordinance no. 38/ Art from the Law 64/1999, established by the Government Ordinance no. 38/ Art from the Law 64/1995, introduced by the Government Ordinance no.38/

12 These activities are accomplished by the administrator or the liquidator because the entire procedure of stating and examining the claims was moved to the stage following the opening of the procedure. Both, the contestation to the claims and to the priority rights established in the preliminary list of the claims, are settled at this stage by the syndic judge, so that the final list of the claims will be registered immediately 52. The effect of registering the final list is that only the holders of the claims registered in this list can participate in the vote, in the creditors meetings and in any distributions of sums. The technical liquidation operations are realized by the liquidator and supervised by the syndic judge. The operations start immediately after the consolidated final list of claims is displayed. The assets may be sold either individually or as a going concern; the sales may be follow the next methods: the direct negotiation sale or auction according to the Civil Procedure Code 53. The distribution of the sums of money obtained from the sales is realized in the following order: A. The amount of money obtained from the sale of the collateral: 1. taxes and any other expenses connected to the sale of these assets, including the necessary expenses for preserving and administering these assets and liquidator s fee. 2. secured creditors claims including all the capital, interests, increases, penalties of any type and also the expenses. B. The amount of money obtained from the sale of the other assets than the collateral: 1. taxes and any other expenses connected to the procedure, including the necessary expenses for preserving and administering these assets of the owner s estate and the fees for all the persons involved in this procedure; 2. the credits with the interests and the other expenses included loans by the bank after the opening of the procedure and the claims resulting from the continuation of the debtor s activity in the period of reorganization. 3. outstanding salaries maximum 6 months before the opening of the procedure; 4. budgetary claims; 52 Art.58.14(1) from the Law 64/1995, modified by the Government Ordinance no. 38/ Art. 100 from the Law 64/1995, modified 12

13 5. unsecured difference from the secured claims uncovered through the sale of the collateral; 6. maintenance claims to the third parties; 7. maintenance claims for the debtor and his family; 8. banking credits including interests and expenses, suppliers and rents; 9. other unsecured claims; 10. subordinate claims in the following order: a) credit from a holder if he owns 10% of the capital; b) claims regarding acts done as a gift; 11. holders claims Officers, Directors, Affiliates The opening of the liquidation procedure stops automatically the right of the administration which the debtor s management had. The responsibility of the administrators, directors or intern auditors who contributed or produced the insolvency state though their activities one month before the cessation of payment is regulated and regards: using of the company s assets in their own interest; unfolding of the activities in their own interest; continuation of same activities which generates losing; false or wrong book keeping; fraudulent appropriation of entrusted property or false increasing of the indebtedness; using the ruining methods to obtain funds; preferential payment of a creditor damaging other creditors 55. The sums obtained from the directors are added to the liquidation estate and will be distributed to the creditors Non-judicial liquidation There is an ordinary non-judicial liquidation, provided by the Law 31/1990 and a special non-judicial liquidation applied to the companies which are privatized. This last formula is regulated by the Law 137/2002. The special liquidation, in privatization case is decided by General Holders Meeting after the analyzing of the debts and the terms when the claims become due. 54 Art. 108 from the Law 64/1995, modified 55 Art.124 from the Law 64/1995,modified by the Government Ordinance no. 38/ Art. 125 from the Law 64/1995, modified by the Government Ordinance no. 38/

14 The general meeting decision to dissolve and liquidate the company may be appealed within 5 days of its being made public 57. The preliminary administrator will notify the company s known creditors, within 2 days of the public notice of the liquidation decision, by fast mail service and advertisement in a widely circulated national newspaper as well as in electronic format. The notice will specify the company s total debts, the ranking of the claims and the deadline for creditors to state their intention to file a statement of claim. The deadline for filing such statements may not go beyond 20 days from the publication of the advertisement 58. The liquidator will draw up the list of creditors within 10 days of taking his office 59. The assets will be sold by outcry auction, by sealed bids or negotiation 60 The priority rank for distribution is the following 61 : 1. Expenses of the procedure, including the once regarding the assets sale; 2. Salaries; 3. Secured claims; 4. Budgetary claims; 5. Domestic and foreign Credits; 6. Loans made to pay the gas and electricity bill; 7. Unsecured claims; 8. Holders claims. The liquidation of the companies which are in the privatization process looks like the ordinary non-judicial liquidation from the Law 31/1990 but is also different of this. Thus, if the non-judicial liquidation, based on the Law 31/1990 is developed under the control and in the interests of the share-holders, the non-judicial liquidation of the companies which are privatized is done, in principle in the interests of the creditors. The voluntary procedure from the Law 31 can be closed only through the extinction of the debts, or, in the privatized companies case, even if the liquidation is closed, the 57 Art from the Law 137/ Art from the Law 137/ Art from the Law 137/ Art from the Law 137/ Art from the Law 137/

15 public institution involved can continue the enforcement of the company s debts against the third parties REHABILITATION/COMPOSITION/SCHEMES 4.1. Overview of schemes for rehabilitation The judicial reorganization plan regulation evaluated in Romania from the mentioned of it like a variant of a generic plan, which can be both reorganization or liquidation plan, with specific difference 62, to the real reorganization plan, with a distinct regulation, nuanced characteristics 63, including much more variants of restructuring and clarifying important issues like the time of reorganization, the debtor s possession of the business, the cessation of the undertaking. The non-judicial restructuring plans included in the financial and economic refreshment programs applied at the state owned companies represented a stage of the privatization process. Diagnostic analyses and divers criteria used to monitory feasible restructuring companies ensured the success of one from among of these programs and allowed the privatization of a lot of companies like a going concern. Such of programs were integrated in the international financing projects Courts Which Administer Reorganizations The jurisdiction of the reorganization cases is the same with the liquidation jurisdiction. The Romanian insolvency procedure has an initial stage when is established the insolvency state, it is opened the procedure and only after that the direction of the case will be concreted according to the initial or subsequent option. The instance from the debtor s registered office administers the reorganization procedure through the syndic judge activities and the court of appeal settles the appeals against the syndic judge s decisions Commencement of Reorganization The conditions to open a reorganization procedure is the insolvency state 65 or impending insolvency Art from the Law 64/ Art from the Law 64/1995, modified by the Government Ordinance no. 38/ Art. 6 and 7 from the Law 64/1995 modified 65 Art and Art. 29 from the Law 64/1995, introduced by the Government Ordinance no. 38/

16 The option for reorganization can be made even by the debtor s request of the opening of the procedure 67. A reorganization plan can be proposed by the administrator too, in 30 days term from the display of the definitively creditors list 68. In the same delay the creditors can propose a reorganization plan 69. The term for commencement of reorganization will be prolonged or drew shorter by the syndic judge, for well-grounded reasons if the interested part asks this Participants and their Roles The participants in the judicial reorganization procedure are: the debtor, the administrator, the creditors meeting, the creditors committee. The syndic judge rules a co-ordination role in the reorganization procedure too. The debtor has the possibility to become the most important participant in the reorganization procedure. He is entitled to have the option for the restructuring formula, to propose the reorganization plan, to execute all the changes and to fulfill all the obligations provided in this plan. The debtor can invest the instance with a reorganization petition in 30 days from the insolvency state appearance 71 or when the appearance of this insolvency state is impended 72 ; propose a reorganization plan 73 ; administer the business in the reorganization period 74 ; fulfill all the measures which result from the plan after the confirmation decision; contest the administrator s measures 75. The debtor may exert any other prerogative through the share-holders association: can propose the nomination of an administrator; examine the possibility of the activity s continuation; participate to the negotiation of a reorganization plan or achieve any other necessary activities able to protect the share-holders interests 76. The administrator is another participant in the reorganization procedure. His role includes the following prerogatives: 66 Art 25.2 from the Law 64/1995, introduced by the Government Ordinance no.38/ Art. 26 letter f from the Law 64/1995 modified 68 Art. 59 letter b from the Law 64/1995 introduced by the Government Ordinance no. 38/ Art. 59 letter c and Art. 59 (1), (2) from the Law 64/1995 modified 70 Art. 59 (3) from the Law 64/1995, introduced by the Government Ordinance no. 38/ Art. 25 (1) from the Law 64/1995 modified 72 Art. 25 (2) from the Law 64/1995, introduced by the Government Ordinance no. 38/ Art. 59 (1), letter a from the Law 64/1995 modified 74 Art. 70 (1) from the Law 64/1995 modified 75 Art. 19 (1) from the Law 64/1995 modified 76 Art. 16 (IV) from the Law 64/1995, introduced by the Government Ordinance no. 38/

17 a) Elaboration of a report regarding the insolvency causes and management responsibilities for this state, the real possibilities of reorganization (60 days from the nomination); b) Elaboration of the acts necessary to be added at the reorganization s petition, examination, correction or completion of these data; c) Elaboration of the reorganization plan; d) Supervising the administrative activities of the debtor if it was disposed; e) Introduction of the actions to cancel the fraudulent or unbalanced acts; f) Assumption or rejecting executory contracts; g) Examination of the claims and introduction the objections to the claims; h) Enforcement of the debtor s claims 77. The creditors participate in the reorganization process as creditors meeting or creditors committee. The most important role of the creditors is about the vote of the reorganization plan. Each claim has one vote. The vote is exercises by the categories of the claims Reorganization Estate There is not regulated the composition of the reorganization estate and the obligation to take an inventory of this estate at the date of the opening of the procedure but each administrator will examine the debtor s estate starting his activity. This is important for his task regarding the elaboration of the complete report about the causes which produced the insolvency. The commercial transactions concerning the reorganization estate are submitted to the authorization of the syndic judge if these transactions surpass the conditions of the current activity 79. The reorganization estate can be increased if the assets that were transferred in same fraudulent conveniences will be return. The suspect period is different for each category of the avoidable acts, from 3 years applicable to the fraudulent transfers, to 120 days applicable to the unbalanced transfers or other acts which prejudice the creditors interests Art. 18 from the Law 64/1995, modified by the Government Ordinance no. 38/ Art.67 (4) from the Law 64/1995, modified 79 Art. 40.III, paragraph 2 from the Law 64/1995, introduced by the Government Ordinance no. 38/ Art from the law 64/1995, modified 17

18 The bad faith of the third part that owns such asset is punished through the obligation to return not only the asset, but also the income of capital Administrative Powers The reorganization s rule is the debtor keeps the possession of the business. He continues to manage the activities, to administer the estate and to sale assets if he states the option to the reorganization 81. This rule is applied both to the actual assets existing at the date of the opening of the procedure and to the assets owned after this date. The syndic judge can decide to raise the administration right of the debtor at the moment when an administrator is nominated and he will establish the conditions for the exercise of this right 82. The administration right includes all the acts or operations like the using, the sale, the rent of the assets and the payments which are framed in the current activity 83. The acts, operations and payments which surpass this condition, will be authorized by the syndic judge with the notification of the creditors and after the settlement of the possible contestations 84. The debtor will continue to exercise the administration right himself or supervised by the administrator even after the confirmation of the reorganization plan Creditors and Claims All the creditors who are the claims previously the opening of the procedure can request the admission of the claims. The administrator examines the value and the priority of each claim and establishes the preliminary list of the claims 86. This list will be consolidated after the settlement of the contestations and registered to the instance. Only the creditors registered in this definitive list can participate to the vote about the reorganization plan Art. 40 I from the Law 64/1995, introduced by the Government Ordinance no. 38/ Art. 40 I, paragraph 3 from the Law 64/1995, introduced by the Government Ordinance no. 38/ Art. 40.III, paragraph 1 from the Law 64/1995, introduced by the Government Ordinance no. 38/ Art.40.III (2) from the Law 64/1995, introduced by the Government Ordinance no. 38/ Art. 70, paragraph 1 from the Law 64/1995, modified by the Government Ordinance no. 38/ Art from the Law 64/1995, introduced by the Government Ordinance no. 38/ Art from the Law 64/1995, introduced by the Government Ordinance no. 38/

19 The creditors vote on the class of claims. The classes of claims are categories of claims which vote separately. There are the following classes of claims: a) Each secured claim which exceeds 10% from the total value of the claims; b) All the rest of the secured claims; c) Salaries on 6 months before the opening of the procedure; d) Budgetary claims; e) Maintenance claims to the third parties; f) Unsecured claims 88. The claims which are not unfair by the plan are considerate that they accept the plan and it is not necessary to vote 89. When the plan provides claims which nothing will receive, these are considerate that reject the plan and also it is not necessary to vote Officers, Directors, Affiliates The management of the debtor s may be kept or changed in the reorganization procedure 91. The directors are responsible for their facts which increase the insolvency state. A legal action can be introduced against the directors or intern auditors and they will be obliged to pay o part of the debtor s liabilities. 92 Are not allowed to the share-holders to interfere with companies activities only in the case the law or reorganization plan provide this possibility Reorganization Plan and Process The reorganization plan must contain general mandatory requirements and specific optional measures. The mandatory requirements regard: 1. Redresement perspectives in accordance with the specific activities of the debtor, the available funds and with the debtor s offer on the market; 88 Art 67 (5) from the Law 64/1995 modified by the Government Ordinance no. 38/ Art. 67 (8) from the Law 64/1995 modified by the Government Ordinance no.38/ Art 67 (9) from the Law 64/1995 modified by the Government Ordinance no. 38/ Art from the Law 64/1995 modified 92 Art. 124 from the Law 64/1995 modified 93 Art. 16 letter e and f from the Law 64/1995, introduced by the Government Ordinance no. 38/

20 2. Measures concordance with the creditors and share-holders interests and respecting public morality; 3. Liabilities manner paying and all claims treatment (all class of claims-unfair or not); compensations comparable with the liquidation distributions and the discharge of debts; 4. Length of reorganization; The optional requirements regard specific measures for the reorganization achievement 94. The Romanian reorganization procedure continue to be complex and heavily. The plan will be filed to the clerk office and Trade Register and communicated to the debtor, administrator, creditor committee and share-holders committee 95. Within 20 days from the plan filing, a hearing of all of these participants will have place and syndic judge will admit or reject the plan after the consulting of an expert about the plan feasibility 96. If much more plans will be admitted, all of them will be submit to the vote. Within days from the admission of the plan, but not before the definitive list of claims displaying, a creditors meeting will have place to vote the plan 97. The plan is published in the Official Journal and two newspapers. The creditors vote on the classes of claims. The plan will be accepted by a class if 2/3 majority from the value of the present claims accept the plan 98. The unfair claims are considerate that reject the plan and the claims which are not unfair that accept the plan; it is not necessary their vote 99. The syndic judge will confirm the plan if: A. At list 2 classes accept or are considerate that they accepted and at list one unfair class accept the plan and B. Each unfair class of claims and unfair claim which rejected the plan is treated fairly and equitably. There is a fair and equitable treatment when: 94 Art. 60, paragraph 1,2,3,4,5 from the Law 64/1995 introduced by the Government Ordinance no. 38/ Art. 62, paragraph 1 from the Law 64/1995 introduced by the Government Ordinance no.38/ Art from the Law 64/1994 modified 97 Art.66 from the Law 64/1995 modified 98 Art 67.7 from the Law 64/1995 modified 99 Art. 67 paragraph 8 and 9 from the Law 64/1995 modified 20

21 1. None class of claims or claim which rejected the plan receive less than the case of liquidation; 2. None class of claims or claim receive more than the total value of each claim; 3. In the case that one unfair class of claims reject the plan, a share-holder or an inferior claim nothing will receive 100. The reorganization process starts after the plan s confirmation. The length of reorganization is 3 years maximum 101 and the achievement of the plan depends by selected reorganization variant. The structural changing regards managerial and financial issues. The organizational measures that the debtor can take are the following: the keeping or changing the management 102, the merge with other company and the modification of the statutes. The financial measures regard the funds necessary for the achievement of the plan and include: a) Partial or total sale of the debtor s assets (the cessation of the undertaking like a going concern); b) Increasing of the company capital; c) Issue marketable securities; d) Conversion claims; e) Swing or paying of real securities; f) Deferring or exemption for payments 103. In the reorganization stage, the debtor benefits by an important facility utilities suppliers can not stop delivery, but the debtor may be obliged to pay a bail equivalent of 30% from the unpaid value of the services 104. The execution process of the reorganization plan is controlled periodically by the syndic judge; the debtor or the judicial administrator must present quarterly reports regarding financial statement and expenses Fast-track/ prepackaged reorganization procedures 100 Art. 68 from the Law 64/1995 modified 101 Art from the Law 64/1995, introduced by the Government Ordinance no. 38/ Art A from the Law 64/1995, introduced by the Government Ordinance no.38/ Art B,C,E,I,F,J from the Law 64/1995 introduced by the Government Ordinance no. 38/ Art from the Law 64/1995 modified 105 Art. 75 from the Law 64/1995, modified 21

22 There are not applicable such kind of reorganization procedures in Romania even if the civil procedure allows the parties to deal and to obtain a judgment including their agreement 106. The procedure is very fast one judge can decide in one delay lawsuit Insolvency treatment of State-owned Enterprises The state-owned enterprises which have budgetary claims more than 50% from the total of the claims and there are in privatization process will be submitted to a special regime. The bankruptcy procedure started against such of companies are suspended for one year and this term can be prolonged one year plus 107. Regarding national utilities (regies autonomes) in insolvency, the regulation is still waiting to be established by the special law 108. The principal regulation concerning privatization process the Government Emergency Ordinance 88/1997 suffered much more changes destined to accelerate the privatization process. The rule established in 2002 about the companies which are privatized is the application of same pre-privatized restructuring programs that will enable these companies to become more attractive for privatization. A special administration stage, focused on shedding assets, restructuring viable business and monitoring the company evolution is the essential of this program 109. The special administration procedure starts through an order of the minister of the public institution involved (Authority for Privatization and Management of state Ownership) or by the local administrative decision and lasts to the date of the transfer of share ownership 110. The company will administer by a special administrator appointed through a mandate by the public institution involved 111. The restructuring program is established through the mandate and must be adapted to the privatization strategy which will be applied and to the economic and financial state of the company. 106 Art. 271,273 Romanian Civil Procedure Code 107 Art. 3 from the Government Ordinance no. 38/ Art. 130 from the Law 64/1995, modified 109 Art. 1, letter d from the Law 137/2002 regarding the acceleration in privatization 110 Art.3 from the Law 137/ Art from the Law 137/

23 A financial survey is also introduced in the company by the public institution involved, consisting in the company s obligation to effect all payments towards the budgetary creditors, the utilities suppliers, the commercial creditors, in-line with a payment schedule drafted by the company together with the special administrator, aiming to reduce the indebtedness 112. Two categories of measures can be taken in the special administration period: A. The first category regards: spin off, mergers, assets sales; workout with/without layoffs; externalizing/transfer of activities and/or social assets; swap debts into shares; monitoring the economic and financial discipline; rescheduling schemes for the outstanding debts 113. B. The second type of measures concern in: the facility given by the suppliers of utilities that can not stop delivery; lifting of the all burdens on the company assets that are to be sold; the suspension of any enforcement actions against to the company 114. The public institution involved and the budgetary creditors will grant the following incentives: total or partial exemption for payment of the budgetary liabilities due and unpaid; exemption for payment of incomes of such liabilities Insolvency treatment for banks and financial institutions The bank s financial difficulties are regulated in Romania by the banking law, 58/1998 and bank bankruptcy law, 83/1998. There are two procedures applicable to the banks according to the degree of insolvency and insolvability of such credit institution. The supervision and special administration of a bank is a procedure destined to rehabilitate the bank with financial difficulties 116 and it is developed out of the court. The bankruptcy procedure is applied to the banks which are insolvent and insolvable and this procedure is under the judicial control. It is a derogatory procedure from the common bankruptcy procedure regulated by the Law 64/1995. The special supervision of a bank is decided by the Managing board of the National Bank of Romania during 120 days in case of violation of the law or of the prudential regulations as in the case of the finding of a precarious financial position Art from the Law 137 amended by the Government Emergency Ordinance no.208/ Art from the Law 137/ Art from the Law 137/ Art. 18.1, letter a,b,c from the Law 137/2002, amended by the Government Emergency Ordinance no. 208/ Art from the Law 58/

24 The supervision is ensured by a commission consisted of 5 to 7 experts from the National Bank and includes: the following up of the way in which the management of the bank acts to remedy the deficiencies; the advice of all the decisions regarding the financial statement and framing in the prudential regulations; the modification of the bank s own regulations; the limitation and suspension of banking activities or operations 118. Even if the supervision commission does not substitute the management of the bank, but the bank can not decide on measures contrary to those disposed by the commission. If the measures of special supervision have not given results, severe deficiencies continue and there are certain data leading to the conclusion that the bank will become insolvent in the following 90 days a special management of the bank may be disposed 119. The special administration shall be carried out by a special administrator, appointed by the Managing board of the National Bank and he can be a specialized legal person. The special administrator shall entirely take over the bank activities and administers the bank in optimum conditions for to preserve the assets and to collects the claims in the interests of the depositors and of other creditors 120. Within 45 days after his appointment, the special administrator analyzes the financial statement of the bank and writes a report regarding the recovery s possibilities of the bank. Based on this report, the National Bank decides to extend the special administration period or withdraw of the authorization and requests the opening of the bankruptcy procedure in the court 121. If the bank recoveries the special administration stops, but, if the bank becomes insolvent and insolvable, the judicial liquidation will be requested. The conditions asked for the commencement of the liquidation procedure of a bank are the following: a) The bank has not fully met its due claims at list 7 working days or 30 days if it is other credit institution and 117 Art. 76 from the Law 58/ Art. 77 from the Law 58/ Art from the Law 58/ Art from the Law 58/ Art. 82 from the Law 58/

25 b) The value of the bank s liabilities exceeds the value of its assets 122. The participants involved in the bank bankruptcy procedure are: the tribunal, the syndic judge, the liquidator and the creditors meeting. The tribunal opens the liquidation procedure, settles the contestations against the request to open the procedure, nominates the liquidator or replaces them, settles the canceling actions of the fraudulent transfers, the contestations of the measures taken by the liquidator and syndic judge, confirms the distribution scheme, opens the procedure 123. The syndic judge controls the liquidator s activity; establishes the dates for the creditors meetings and conducts its; decides about the liquidator s reports, settles the objections to the reports; confirms the distribution scheme, initiates actions to cancel fraudulent debtor s acts or unbalanced transfers 124. The liquidator achieves the liquidations activities; examines the bank activity and elaborates the report regarding the insolvency causes; operates in the bankruptcy accounts of the bank; takes the assets inventory; employs the staff liquidation; administers the activities and operations of the liquidation; assumes or reject executory contracts; collects the claims; sales the assets; draws up the monthly report and the liquidation balance sheet 125 The judicial liquidation of a credit institution will follow the rules of the Law 64/1995 and the directors are responsible for their acts that contributed to the bank bankruptcy 126. The insolvency of insurance companies is regulated separately. The Law 32/2000 establishes a special procedure, applicable to the insurance companies. Bucharest Court of Appeal shall appoint a special administrator of such company at the request of the Supervising Commission of the Insurances if: a) The insurer has not fully met the claims and b) The insurer s activities are not administered in the respect of specific prudential rules Art. 1 from the Law 83/1998,modified by the Law 597/ Art. 3 from the Law 83/1998 modified by the Law 597/ Art.5 from the Law 83/1998, modified by the Law 597/ Art. 10 from the Law 83/1998, modified by the Law 597/ Art. 22 from the Law 83/1998, modified by the Law 597/ Art. 30 from the Law 32/2000 regarding the Insurances 25