Corona Crisis: Amendment of the obligation to file for insolvency in CEE

09 April 2020 | newsletters

With the fourth law on COVID-19, the Austrian legislator has suspended the obligation of an overindebted debtor to file for insolvency until 30 June 2020, irrespective of the cause of the over-indebtedness. Some other countries in the CEE region have also adopted measures to combat the consequences of COVID-19 as detailed in the following overview:

Jurisdiction

General: Duty to file for insolvency

Amendments due to COVID-19?

Austria

(latest checked/updated on 9 April 2020)

If the company is illiquid or overindebted (in terms of insolvency law), each managing director is obliged to file for insolvency without culpable delay, in any case within 60 days after the occurrence of illiquidity or over-indebtedness. Management may only wait to file for up to 60 days (maximum period) if it uses the time to implement a (promising) restructuring concept.

The Austrian legislator has legally clarified that in case of insolvency caused (at least partly) by COVID-19, the maximum period of 60 days is doubled to 120 days after the occurrence of the illiquidity. In addition, the obligation to file for insolvency due to over-indebtedness is suspended until 30 June 2020. If the debtor is overindebted by 30 June 2020, he must file for insolvency within 60 days after 30 June 2020 or within 120 days after the occurrence of the over-indebtedness, whichever period ends later.

 

Bulgaria

(latest checked/updated on 1 April 2020)

In general, if the debtor becomes illiquid or overindebted (in terms of insolvency law), it is obliged to file for insolvency within 30 days after the occurrence of illiquidity or over-indebtedness. The members of management are jointly liable to the creditors of the company for damages caused by non-compliance with the filing deadline.

As of 1 April 2020, there are no explicit amendments in the insolvency laws. However, the State of Emergency Act provides that certain statutory deadlines which expire during the state of emergency (currently from 13 March to 13 April) are extended by one month. This extension rule should also apply to the insolvency filing deadline, i.e. it will be prolonged until 13 May.

Croatia

(latest checked/updated on 1 April 2020)

In general, if the company is illiquid or overindebted (in terms of insolvency law), each person legally authorised for company representation is obliged to file for insolvency without culpable delay, in any case at the latest within 21 days after the occurrence of illiquidity or over-indebtedness. In addition, the Croatian Financial Agency is obliged to file a proposal to initiate insolvency proceedings in certain limited instances (e.g. the debtor's accounts are blocked for more than 120 days).

No amendments yet.

Czech Republic

(latest checked/updated on 1 April 2020)

The debtor is obliged to file an insolvency application without undue delay after they learnt (or with due diligence ought to have learnt) about their insolvency, i.e. inability to pay debts or over-indebtedness in terms of insolvency law.

No amendments yet. However, amendments are currently being discussed internally within the Ministry of Finance.

Hungary

(latest checked/updated on 2 April 2020)

n/a (under Hungarian law the debtor is not obliged to apply for insolvency proceedings)

n/a

Moldova

(latest checked/updated on 31 March 2020)

In general, if the company is illiquid or overindebted (in terms of insolvency law), each managing director is obliged to file for insolvency without culpable delay, in any case within 30 days after the occurrence of illiquidity or over-indebtedness. If a managing director fails to file an insolvency submission within this term, the managing directors will bear subsidiary responsibility vis-à-vis the creditors for claims against the company.

During the state of emergency in the Republic of Moldova (i.e. until 15 May 2020), no limitation terms will start running, and those started should be suspended until the termination of the emergency period.

Poland

(latest checked/updated on 31 March 2020)

Each managing director is required to file for insolvency within 30 days of the company becoming cash-flow insolvent and/or balance-sheet insolvent or alternatively to arrange for the actual opening of restructuring proceedings within this deadline. If a director fails to do so, he/she may face the risk of personal (financial and criminal) liability.

No amendments yet.

Romania

(latest checked/updated on 1 April 2020)

In general, if the company is in a state of insolvency (in terms of insolvency law), each managing director is obliged to file for insolvency without culpable delay, in any case within 30 days after the occurrence of illiquidity or over-indebtedness.

No amendments yet.

Slovakia

(latest checked/updated on 1 April 2020)

Under Slovak law, the debtor is obliged to file an application for bankruptcy within 30 days after it learned (or should have learned had it exercised due care) about its over-indebtedness. This obligation is exercised on behalf of the debtor by the statutory body or member of the statutory body of the debtor, the liquidator of the debtor and legal representative of the debtor.

The period within which the debtor is obliged to file an application for bankruptcy in case of over-indebtedness that occurred between 12 March 2020 and 30 April 2020 is 60 days.

Slovenia

(latest checked/updated on 1 April 2020)

If a company becomes insolvent (illiquid or overindebted), the management is obliged to draw up a financial restructuring measures report (setting out an assessment of out-of-court and court-sponsored restructuring options) within 30 days starting from the day on which the management has or would have established insolvency had it acted with required diligence. Deadlines for further actions will depend on the assessment in the report. If no viable restructuring prospect is identified, the management must file for bankruptcy (insolvent liquidation) within a further three days (i.e. 33 days from the onset of insolvency). If compulsory settlement (a court-sponsored insolvent reorganisation) is identified as a viable option – and any out-of-court restructuring or recapitalisation measures have failed – the management must file for the opening of compulsory settlement within three months from the onset of insolvency.

No amendments yet. According to a government legislative proposal, the above deadlines will be suspended for the duration of the COVID-19 emergency legislative package (currently envisaged to stay in force until 31 May 2020, with a possibility of prolongation by a further 30 days) and will expire within a further one month (obligation to draw a report), or three months (obligation to file for bankruptcy or compulsory settlement).

 

 

This article is part of our coronavirus-focused legal updates – visit our coronavirus info corner to get more info!