POLAND Law and Practice Contributed by: Karol Tatara, Paweł Kuglarz, Anna Czarnota and Mateusz Kaliński, Tatara & Partners Restructuring & Insolvency Law Firm
3. Out-of-Court Restructuring 3.1 Out-of-Court Restructuring Process Consensual restructuring is becoming increasingly popular in Poland, mainly because of the uncertainty and duration of formal court proceedings. The banks and other financial institutions are usu - ally willing to be engaged in consensual restructuring proceedings and they frequently use standstill agree - ments. However, it must be noted that such consen - sual and out-of-court restructuring proceedings must be initiated at an early stage of financial difficulties. Only banks will be able to establish that the debtor is trustworthy and has a good chance of efficiently restructuring. However, in general, consensual restructuring is used mainly by bigger companies, probably because of the banks’ involvement and the internal bank regulations on low-quality or lost receivables and the requirement to make write-downs. There is also no requirement of previous, consensual restructuring before initiating formal court proceed - ings. One of the reasons why consensual restructuring proceedings are still less popular than formal restruc - turing or insolvency proceedings is that out-of-court workouts and similar restructuring proceedings do not free the management board from legal liability towards the creditors should the restructuring process fail. This should lead to standard early reaction processes in debtor companies, especially when there is a threat of insolvency. Consensual restructuring is usually commenced by a standstill agreement with all the important creditors, especially the banks, as its parties. Later on, the restructuring agreement is negotiated, where typical undertakings include the sale of some of the debtor’s assets, the optimisation of the costs and an increase in revenues, sometimes opening to new markets or using different restructuring plans. On the other hand, a market standard provides for steering committees that supervise the restructuring process
2.4 Unsecured Creditors The general rule regarding different classes of credi - tors is that secured creditors are satisfied from the sale of an encumbered object, while other creditors in an insolvency are treated globally, according to the rank of their claims. The rank of claims is regulated under the Bankruptcy Law. The main rule is to satisfy claims with the high - est priority (satisfy in the first place), that is, the costs of proceedings and other liabilities of the bankruptcy estate. The latest amendments to the Bankruptcy Law introduced the priority of the amounts received from the liquidation of the living accommodation of the bankrupt who is a natural person. It stipulates that it is necessary to satisfy the housing needs of the bankrupt and the persons dependent on the bankrupt with an amount corresponding to the average lease rent of liv - ing accommodation for a period from 12–24 months, awarded to the bankrupt from the amount earned from the sale of such accommodation or house. The remaining claims are satisfied in the order speci - fied in Article 342 of the Bankruptcy Law, depending on the category into which they fall (claims falling into the lower category may be satisfied only if claims fall - ing into the higher categories have already been fully satisfied). The first category of claims covers, among others: employees’ claims, maintenance claims and workers’ compensation, social security contribu - tions defined in the Social Security System, certain amounts resulting from the restructuring proceedings of the debtor, etc. Under Polish law, unsecured creditors have the right to take part in the proceedings, file petitions and motions. They are also entitled to be satisfied. They cannot, however, legally block or disrupt the proceed - ings. Pre-judgment attachments are not used in Poland, as neither the Restructuring nor Bankruptcy Law provide for regulation thereof. However, transfer of ownership prior to a court judgment is practically possible, espe - cially with regard to a registered pledge with the pos - sibility to attach ownership (taking over the subject of the pledge).
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