Insolvency 2025

ROMANIA Trends and Developments Contributed by: Stan Tîrnoveanu and Alexandru Iorgulescu, Zamfirescu Racoți Vasile & Partners Attorneys At Law

authority ANCOM to reduce overlapping costs and waste of resources; changes to insolvency procedures to allow faster restructuring/liquidation; adjustment of corporate taxation; and changes to other regulations to improve compliance and increase revenue (such as raising the health insurance contribution base). On a short-term basis, the two legislative packages may cause a drop in purchasing power, which on the one hand will negatively impact Romania’s economic growth (estimated to be below 1% in 2025), while on the other hand it will lead to liquidity problems for some companies, particularly small and medium enterprises (SMEs) that have low profit margins and low cash-flow flexibility. More companies will struggle to absorb the increase of taxes, especially the ones with inconsistent or seasonal income streams, so the measures are likely to generate an increase in the overall risk of insolvency. With taxes on banks and financial institutions being raised, an increase in the cost of financing is also expected, making it harder for companies to access loans or to meet their outstand - ing obligations, aspects that also increase the chance of insolvency. In the medium term, the broader fiscal consolidation and governance reforms could restore economic stability, which may sanitise the market and The second legislative package adopted by the gov - ernment also contains amendments to Law 85/2014 on insolvency proceedings. Among them is the intro - duction of the definition of the “party closely related to the debtor” concept taken over and adapted from the definitions of the Draft Directive COM(2022) 702. Within the framework of the directive, the parties closely related to the debtor are defined mainly to ensure transparency and fair treatment in what con - cerns the valuation and sale of the asset/business in the first stage of the pre-pack procedure, a stage that precedes the official opening of the insolvency proce - dure and which is largely confidential. The legislator introduced this concept even though Romania has not yet regulated the pre-pack procedure with its two stages, the preparation and the liquidation, providing only for classic liquidation as an effect of the opening of bankruptcy. The new law regulates, in more detail, the creditors’ committee regarding the nomination (ie, eventually reduce insolvency rates. Amendments to the insolvency law

that a provisional committee can be appointed directly by the syndic judge), the number (up to seven mem - bers) and the manner of exercising rights within the committee. The law restricts the possibility for more than one person closely related to the debtor to be part of the committee, or to become president, while also establishing the obligation of such a person to inform the judicial administrator of its relationship. There are also changes regarding the sale of assets as an independent ensemble (a bundle of imovable and movable assets acting as a functional business/ branch of a company). Even if such assets are sold in a forced liquidation judicial procedure, the closely related person can only acquire the assets, among other conditions, if this person has duly notified the creditors and other bidders of its relationship with the debtor. Another amendment requires the liquidator to prepare a post-sale report justifying that the sale as an independent ensemble was carried out in a com - petitive and transparent manner – namely, that the winning bid was the best bid submitted, even though this was a public liquidation procedure, which cur - rently also provides for advertising in a large news - paper or on the insolvency practitioners’ association (UNPIR) website. Although the sale as independent entity in the current situation is a judicial procedure, and different from the pre-pack preparation stage, the proposed amendments regarding the sale imported from the pre-pack procedure are likely to increase the degree of formality and lead to the extension of the liq - uidation period, while also making certain assets less desirable. An important aspect is that the provisions regulating the acquisition by closely related persons also apply to ongoing procedures if the final table of claims has not been published by the date the law will come into force. This means that the reorganisation plans will have to be adapted to consider this capi - talisation hypothesis. In the second legislative package, the legislator also intervened on the fees of insolvency practitioners by amending Emergency Ordinance 86/2006. Among the changes is the automatic reduction of the fee by 50% after the first 18 months from the appointment of the practitioner, and the capping of the success fee – interventions that can be interpreted as interference in the freedom to set prices and a factor distorting competition.

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