We believe in long term relationships with clients, therefore we always designate a client relationship manager and organize periodical clients’ satisfaction reviews.
Our reaction time guarantee programme assumes that a lawyer involved in a given matter contacts a client within 8 hours after communicating with our office.
With our background we are prepared to maintain high quality of our services. As a local firm we are capable to link high quality with a flexible fee structure adapted to current market expectations.
We are members of the International Business Law Consortium (IBLC) established almost 20 years ago and having more than 100 members with over 1500 professionals around the world.
Our works with respect to restructuring and insolvency are coordinated by Adam Milosz who is an attorney-at-law and also a licensed insolvency practitioner and a member of the National Chamber of Insolvency Practitioners (Krajowa Izba Syndyków), as well as of INSOL Europe (international association for experts specializing in restructuring and insolvency matters).
+48 22 211 22 87
Formal bankruptcy proceedings:
As of 1 January 2016 apply new provisions of restructuring law and amended provisions of bankruptcy law.
The new law is to attain the following objectives:
Prepared liquidation is well known and widely used in many jurisdictions, including the United Kingdom and the United States.
In “classic” bankruptcy, which is usually a lengthy and costly process, assets often lose their value, which is unfavorable for creditors. In a typical situation, declaration of an operator’s bankruptcy is a shock to its employees, business partners and customers. Employees leave or are dismissed, business partners refuse to do business or request payment in advance, banks refuse further funding, assets lose their value (e.g. in the case of seasonal goods not sold at the right time).
Receiver’s attempts to sell the bankrupt business as a whole or its organized portion often fail and only individual assets are put up for sale. The prices asked by the receiver for particular assets are calculated for the so-called forced sale and are generally lower than market prices.
The basic premise of the “pre-pack” procedure is a conviction that it is better to sell fast an operating business whose activities will be continued by the buyer than to engage in lengthy bankruptcy procedures hoping to sell well its assets (e.g. in bids).
Under the “pre-pack” procedure, before bankruptcy is declared, there is a search for an investor who would buy the entire business from the bankrupt operator on pre-agreed terms and for a fixed price. Since the sale involves an operating business, its appraisal should take into account goodwill, which is the difference between the total value of individual assets and the total asset value resulting from the fact of the business being bought as a whole.
The sale contract may be entered into by the receiver as late as on the date of bankruptcy declaration.
According to the new restructuring law, sale under the pre-pack procedure may involve an entire bankrupt business, an organized portion of a bankrupt business or assets forming a substantial portion of a business.
Foreign experiences show that the main practical problem with a pre-pack sale is the issue of business appraisal and the omission of bidding or other buyer selection procedures.
The appraisal (description and value estimation) must be prepared by a person registered as a court expert. In addition, applications for prepared liquidation has a greater chance of success if they are supported by professional analyses and simulations incorporating the “pre-pack” option.
Preparation of such analyses requires debtor’s cooperation with an interdisciplinary team of advisors, including both licensed restructuring consultants, lawyers, financiers and tax advisors.
GALT has such an interdisciplinary team.
This is the most de-formalized one of the new proceedings. As a rule, it is intended for those operators who are solvent but expect financial difficulties in the future. A formal constraint is the requirement that the amount of disputed claims required to vote on an arrangement do not exceed 15% of the total claims required to vote on the arrangement.
The operator, in cooperation with a licensed restructuring consultant, works on securing sufficient support from creditors for his arrangement proposals. Voting takes place outside the court. The application for arrangement approval is not filed until the debtor secures the majority of votes required for adoption of the arrangement.
During the arrangement approval proceedings the debtor is not able to protect himself from creditors by suspending collection of the debts under arrangement.
The terms of cooperation with the restructuring consultant are defined in an agreement with the debtor.
In this process, an arrangement is entered not through debtor’s independent collection of votes but at a meeting of creditors convened by the court. The arrangement supervisor is appointed by the court, but the debtor and creditors are able to cause his replacement.
It is possible to secure debtors’ assets by suspending collection of the debts under arrangement if the collection could hinder or prevent the arrangement.
As in the case of arrangement approval proceedings, the total amount of disputed claims required to vote on an arrangement cannot exceed 15% of the total claims required to vote on the arrangement.
If more than 15% of the total claims required to vote on an arrangement are disputed, the debtor is not able to benefit from accelerated arrangement but must follow the “normal” arrangement procedure.
The proceedings are conducted under the same principles as previous bankruptcy procedures with an option of arrangement; they are intended for the operators on the brink of insolvency or already insolvent.
As a rule, the business continues to be run by its existing management. However, the debtor is under constant supervision of the court and its creditors. The debtor are able to obtain protection from enforcement procedures. He also needs to submit arrangement proposals already in the application filed with a court.
Recovery proceedings allow deep restructuring of debtor’s liabilities, assets and employment. The rule is that in recovery proceedings, debtor’s representatives are replaced by an appointed administrator. The administrator has the use of a number of legal tools previously available only to receivers in bankruptcy proceedings with an option of liquidation, i.e. the ability to abandon contracts unfavorable to the debtor (cherry picking), facilitated dismissal of employees or sale of assets with the same effect as sale in enforcement proceedings.
In this procedure, an arrangement with creditors is only entered after recovery measures are completed.
Quite often a debtor has problems with only some creditors (e.g. banks). Until now the debtor had to engage in individual negotiations with each such creditor and could not impose debt restructuring on those creditors who had not agreed to it. The essence of a court-approved arrangement is that all the claims covered by the arrangement, hence also those of dissenting creditors, are appropriately restructured (e.g. partial debt reduction, debt spreading into installments, conversion of debts to shares).
The new rules are intended to enable the debtor to enter into an agreement only with certain creditors. Other liabilities of the debtor (e.g. to employees and business partners) remain unchanged. Partial arrangement should be faster than restructuring of the entire debt.
One of the main problems faced by operators in a crisis is their lack of liquidity both in the course of judicial proceedings (prior to arrangement) and also during implementation of an adopted arrangement. The new provisions provide that in order to obtain financing any lending provided in the course of restructuring has a senior rank.
First, if restructuring fails and bankruptcy is declared any borrowing liabilities, as claims which arose after the opening of restructuring procedures, are ranked senior and satisfied as a first priority. In addition, used as security for the financing may be such collaterals which cannot be deemed ineffective vis-a-vis the bankruptcy estate.
The bankruptcy law evolution also affects the receiver who became a restructuring consultant. Creditors and debtors have a say in the selection of the persons serving in various roles in a restructuring process (court supervisor, arrangement supervisor, administrator), which in practice means that such matters are no longer decided exclusively by the court. In arrangement approval proceedings, the decision remains solely with the debtor who enters into an agreement with a selected restructuring consultant.
This results in market verification of the skills, professionalism, commitment and operating speed of restructuring consultants.