The New Insolvency Code
The New Insolvency CodeUpdated on Sunday 17th April 2016
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The new Insolvency Code was adopted by the Romanian Parliament in 2014 and it brings important changes to the Romanian insolvency and bankruptcy law.
The new code is represented by Law no. 85/2004 regarding insolvency prevention policies and insolvency and it was published in the Official Gazette, Part I, no. 466 dated 25th June 2014.
Some of the most important provisions of the new law are:
- maximizing asset recovery and debt recovery;
- offering debtors a chance to recover their business efficiently and effectively, either through insolvency prevention procedures or through judicial reorganization;
- ensuring that same rank creditors are treated equally;
- ensuring a high degree of transparency and predictability for the procedure;
- recognizing the creditor’s rights and respecting the order of the claims, based on a set of clearly determined rules that will be applied consistently;
- for insolvency prevention procedures: favoring the amiable negotiation/renegotiation of the claims and concluding a preventive agreement;
- efficient capitalization of assets.
The new Insolvency Code avoided the matter of personal bankruptcy, understood as the procedure that applies to individuals that have difficulties in paying their bank installments. The Romanian Banking Association and the International Monetary Fund opposed the introduction of a personal bankruptcy law in Romania and the Romanian Government has made a commitment in this respect to the International Monetary Fund to not include such provisions in the Romanian legislation.
The new law aims to hold accountable the individuals that are found guilty for causing company insolvency. According to the new code, the person found guilty for causing a company’s insolvency can no longer be appointed as company manager or if the person is the manager of several companies, he or she will lose this right for 10 years after the court decision.
The new law introduces a threshold value for the debtor, the same as the one set for the lender: 40,000 RON (approximately 9,000 Euro, in July 2014), to initiate the insolvency procedures.
The law enforces measures that, at least in theory, will accelerate the settlement of insolvency procedures.