Restructuring

Restructuring, or legal protection from creditors, is a process which takes place in accordance with Act No. 7/2005 Coll. on Bankruptcy and restructuring. It is a recovery process of a company, which results in partial and gradual satisfaction of the debtor's creditors in the amount and due date approved in the restructuring plan. For the company itself, restructuring means a second chance at running a business.

During the restructuring process, it is not possible to seize the debtor's assets, it is not possible for the creditors to proceed with the execution of lien, distraint and legal proceedings are stopped.

At the height of the economic crisis, restructuring is a way to solve temporary insolvency with the impact on the entire EU internal market.

The advantage of restructuring is the fact that after a successful approval of the restructuring plan, the debtor's old obligations cease to exist and he is given an opportunity to successfully continue with his business activities. Unlike bankruptcy, restructuring ensures the maintenance of economic independence and legal personality of the debtor, the achievement of economic recovery, the preservation of jobs, the continuity of income etc. 

Many creditors prefer restructuring to bankruptcy, as the degree of satisfaction of the debtor's obligations is much higher when the company can keep operating instead of going bankrupt. It should be noted that the whole procedure is carried out under the supervision of the restructuring administrator, who gains rights similar to those of a statutory body when the restructuring is allowed. The whole process is regulated in a restructuring contract in which the parties regulate their rights and obligations. The administrator sees to it that the whole procedure is carried out in accordance with Act No. 7/2005 Coll. on Bankruptcy and restructuring, but also in accordance with the applicable law of the Slovak Republic. The basis of successful cooperation is trust and the professionalism of the debtor's management during the process of restructuring.

The task of the restructuring administrator is to work out a test of restructurability, a restructuring report, to prepare a proposal to allow restructuring, to supervise the debtor's business activities, to improve the business plan, to suggest measures and solutions, to negotiate with creditors, to prepare the restructuring plan and to conduct a due diligence of the company.

The final legal act of the restructuring process is a restructuring plan. The restructuring plan is a binding document regulating the creation, modification and termination of commitments of persons referred to therein. The restructuring plan also called "supercontract", which newly governs all relations between the debtor (a company in restructuring) and his creditors.

According to restructuring plan and above all in accordance with the debtor's economic results, trustee suggests a gradual (e.g. payments) and proportional (statistically 33.3%) satisfying the creditors.

The phases of restructuring

• the development of the restructuring report + due diligence
• the assessment of the proposal to allow restructuring
• the authorization of restructuring
• a survey of the debtor's creditors 
• the preparation of the restructuring plan
• the approval of the restructuring plan
• the confirmation of the restructuring plan

The legal effect of the court's confirmation of the plan is the termination of enforceability of claims that the creditors did not register properly and timely. It is not possible to recover claims already recognized in the execution proceedings, the right to the place lien on the debtor's property expires if the lien was not registered properly and on time. 

Are you interested in restructuring? If so, come talk about the possibilites of restructuring in your company and we will prepare a restructuring study for you free of charge based on your economic results.