Romanian Insolvency Law: A Practical Guide for Businesses

Insolvency is a difficult reality for many businesses, but understanding Romania's legal framework can help creditors recover debts and give struggling companies a chance to restructure. Law no. 85/2014 governs insolvency prevention and proceedings, offering several paths depending on the debtor's financial health and intentions.

Understanding the Legal Framework

The main types of proceedings are insolvency, judicial reorganisation, and bankruptcy. A preventive procedure called concordat preventiv allows a company to negotiate an out-of-court agreement with creditors before formal insolvency begins. Insolvency itself is defined as the state where a debtor's funds are insufficient to pay due, certain, and liquid debts.

The Insolvency Process: Key Stages

The process typically unfolds in distinct stages:

• Filing: A debtor, creditor, or certain institutions may file an insolvency application with the tribunal.
• Opening: The court verifies the legitimacy of the claim and opens proceedings, appointing a syndic judge and a judicial administrator or liquidator.
• Observation period: Lasting up to 12 months, the debtor's activity continues under supervision while creditors file claims and a reorganisation plan may be proposed.
• Reorganisation or bankruptcy: If a viable plan is approved, the company enters judicial reorganisation; otherwise, bankruptcy leads to liquidation of assets.

Practical Considerations for Creditors

Creditors must file proof of claims within the deadline set by the court, usually 45 days from the opening of proceedings. They may also participate in creditors' meetings, where major decisions are voted on. Secured creditors enjoy priority over unsecured ones in distributions.

Practical Considerations for Debtors

Debtors should act early. Filing for preventive concordat can halt enforcement actions and buy time to negotiate. Once insolvency starts, the company's management must cooperate with the judicial administrator and provide all required documents. Failure to do so can lead to personal liability for directors.

Conclusion

Navigating insolvency in Romania requires careful planning and professional advice. Both creditors and debtors benefit from understanding the legal steps and acting promptly to protect their interests.