A look at corporate, personal and, where relevant, partnership insolvency proceedings in Greece, with a brief description to explain key features, as part of our Dictionary of Insolvency Terms in EU Member States. In particular, we highlight who controls the procedure and whether it is likely to be accompanied by a moratorium to prevent enforcement.
Διαδικασία έγκαιρης προειδοποίησης
Timely warning procedure
- The debtor may request from public and professional institutions an assessment of his insolvency risk and may request advice on mitigating actions to avert the risk of insolvency.
- This procedure can take the form either of an electronic mechanism, an automated platform where the debtor submits data and receives the outcome of the relevant assessment or one or more in-person consultancy session(s).
- Though the law does not provide explicit criteria for accessing this procedure, eligible debtors should be considered ones that face an insolvency risk.
Εξωδικαστικός μηχανισμός ρύθμισης οφειλών
Debt settlement mechanism
- This mechanism covers debt owed to financial institutions, to public sector institutions, and social security institutions.
- Triggering this mechanism requires an electronic application by the debtor (natural or legal person). However, a debtor is not eligible when (i) either at least 90% of his debt is owed to one entity or the total amount of his debt stands at no more than EUR10,000, (ii) he has already applied under a pre-existing form of debt settlement procedure and the latter is still ongoing, (iii) he is under liquidation, (iv) he has committed any financial crimes, (v) there are no facts that prove that the debtor’s financial situation is expected to worsen by at least 20%.
- The creditors have the discretion as to whether or not they will participate in this procedure.
- This procedure (i) places the debtor and the participating creditors in a moratorium during which all enforcement measures are suspended and (ii) does not constitute a material reason that justifies the termination of a contract for the debtor’s counterparties.
- Upon agreement, the debtor and the creditor(s) sign a restructuring contract that averts the risk of insolvency.
- When the primary residence of the debtor is at risk of foreclosure due to the debt owed and for which debt the primary residence was provided as mortgage, then the state may support the debtor by financing his monthly payments to a certain extent under the conditions provided in the law.
- A debtor-creditor agreement aimed at rescuing the debtor’s business. It can be applied to any business (natural or legal person) or any for-profit legal entit, that demonstrates a viable business plan.
- The debtor or the bankruptcy trustee may apply to the competent court to initiate the rehabilitation. In rehabilitation, a settlement is reached as a result of negotiations between the debtor and its creditors together with a separate business plan having the same duration as the settlement agreement.
- A temporary suspension of enforcement measures against the debtor’s property may be granted by the court during the period of the rehabilitation.
- Either the creditors or the debtor may apply before the court for the appointment of a mediator to facilitate the rehabilitation procedure.
- Creditors’ claims regarding new financing provided to the debtor during the rehabilitation procedure rank senior to all other pre-existing claims.
- In rehabilitation, a creditors’ meeting is not required (creditors can be approached ad hoc) and the plan can be voted for by creditors representing at least 50% of secured claims and creditors representing at least 50% of unsecured claims. Alternatively, a plan can be approved by creditors representing at least 60% of all claims including at least 50% of secured creditor claims (or those with special privilege including those with mortgage pre-notations). Non-consenting creditors should not be worse-off as result of the agreement. A creditors’ meeting can be convened.
- In case of debt owed to the state, its consent is deemed to exist subject to the fulfilment of certain conditions.
- A rehabilitation plan must be ratified by the court and is then binding on all creditors.
- In the interim period between the submission of a rehabilitation plan before the court and the court’s decision on the plan, (i) all enforcement actions against the debtor are suspended, (ii) foreclosure measures against immovable property and business equipment is suspended for up to 4 months. A trustee may be appointed by the creditors in this interim period.
- A transfer of business through an approved rehabilitation plan does not require any public tender procedure, and can include a hive down to an established Special Purpose Vehicle (SPV).
- It is possible to enter into a rehabilitation plan when facing an insolvency risk, prior to an insolvency risk being identified or ven after the debtor has become insolvent.
Η ειδική εκκαθάριση εν λειτουργία – Κατάργηση άρθρου
Special liquidation (now abolished)
- This procedure has been abolished; its aim was the continuation of the debtor’s business as a going concern for public auction.
- The procedure could be requested by the debtor or a creditor and commenced if payments to creditors had ceased or cessation was imminent.
- If approved, management of the debtor’s affairs was taken over by a special liquidator.
- During the procedure, creditors were not able to exercise any enforcement rights pertaining to the business assets under special liquidation.
Θεσμός έκτακτης διαχείρισης (Ν. 4307/2014) – Κατάργηση άρθρου
Special administration procedure (now abolished)
- A procedure to transfer the debtor’s business as a going concern or its assets through a public auction and for creditors to be repaid from the auction proceeds.
- A petition to open the procedure and appoint a special administrator (who would take over management of the debtor’s business for 12 months) could be filed before the court by the debtor’s creditors (at least one of which had to be a credit or financial institution) representing at least 40% of total debts.
- Any debtor that was a legal entity pursuing a financial purpose could be subject to the procedure.
- The special administrator would continue the business of the debtor until its transfer to a third party through a public auction.
- Bankruptcy is initiated with a view to the collective satisfaction of creditors’ claims by liquidating the debtor’s estate.
- Bankruptcy proceedings can be initiated by or against any natural or legal person that pursues economic – yet not necessarily business – activity. Any debtor that has ceased payments in a general and permanent way (defined as an inability to pay debts as thy fall due) must file bankruptcy petition within 30 days following cessation of payments.
- A debtor that is in imminent financial distress can also file a bankruptcy petition as can a creditor, provided the debtor has ceased payments in a general and permanent way.
- A debtor is deemed insolvent when payments are due for more than 6 months against one entity for an amount that represents more than 40% of the debt owed to this entity under the condition that the debt owed exceeds the amount of EUR30,000.
- Part of the assets that are subject to liquidation is also the annual income of the debtor that exceeds his reasonable living expenses.
- Once a debtor is declared bankrupt, an insolvency administrator (syndikos) will be appointed to manage the debtor’s assets and affairs. In exceptional circumstances, a debtor can remain in control of its assets and affairs, with the insolvency administrator’s cooperation. The bankruptcy court and the court-appointed reporting judge supervise the bankruptcy proceedings.
- On the submission of an application for a bankruptcy declaration and until the grant of the relevant order, a stay against all enforcement actions can be provided as a preliminary measure.
- Once the debtor is declared bankrupt, all unsecured and general preferential creditors are barred from enforcing their rights and remedies against the debtor.
- Secured creditors can continue to pursue claims against secured assets unless the secured assets are closely connected to the debtor’s business, production unit or enterprise.
- The stay remains in place until the creditors’ committee decides whether the liquidator will: (i)continue the debtor’s commercial activities for a certain period of time; (ii) lease the business; (iii) sell the company as a going concern through a public auction; or (iv) proceed to a piecemeal sale of the debtor’s assets.
- Liquidation proceedings are concluded on liquidation of all the debtor’s assets.
Ρυθμίσεις για τους ενέγγυους πιστωτές
Provisions for secured creditors
- Secured creditors are ranked higher than unsecured creditors in the creditor hierarchy and thus receive priority payment from liquidation proceeds.
- Any suspension of individual actions during insolvency proceedings does not apply to secured creditors in relation to the secured assets of the insolvency estate.
- Security interests over movable assets, real estate, aircraft and ships can only be enforced in enforcement proceedings, in accordance with the applicable procedural requirements of the Greek Code of Civil Procedure.
- Security interests over bank accounts, trade receivables, insurance claims and generally monetary business claims and security interests qualifying as financial collateral (within the meaning of Directive 2002/47/EC on financial collateral arrangements, transposed into Greek law by Law 3301/2004) can normally be enforced without formal enforcement proceedings.
Απλοποιημένη διαδικασία επί πτωχεύσεων μικρού αντικειμένου
Simplified procedure for bankruptcies of smaller amounts
- A simplified procedure for natural or legal persons subject to bankruptcy proceedings which applies where two of the following conditions are met: (a) the debtor’s assets are valued at less than EUR350,000; (b) the debtor’s net turnover is less than EUR 700,000; and (c) the debtor has employed an average of 10 persons or fewer at any one time in the previous financial year.
- The liquidator verifies and adjudicates creditor claims and makes distributions to creditors.
Σχέδιο αναδιοργάνωσης – Κατάργηση άρθρου
Reorganisation plan (now abolished)
- An agreement between the debtor and its creditors with a view to rescuing the debtor’s business. It used to be applied to any business (individual or legal entity) or any for-profit legal entity.
- Any debtor was allowed, within four months of being declared bankrupt or filing a voluntary bankruptcy petition, to propose a reorganisation plan. A liquidator could also propose a reorganisation plan.
- Acceptance of a reorganisation plan required a majority of 60% of total claims, at least 40% of which had to be secured.
EU Directive Implementation
The EU Directive on Restructuring and Insolvency1 requires Member States to incorporate minimum common standards into their national restructuring and insolvency laws by 17 July 2021, with an option to extend that deadline by one year. The intention of the Directive is to reduce barriers to the free flow of capital stemming from differences in Member States’ restructuring and insolvency frameworks, and to enhance the rescue culture in the EU.
Notable features required to be included in Member States’ national laws include:
- An effective preventive restructuring framework to enable debtors experiencing financial difficulties to restructure at an early stage, with a view to preventing insolvency and ensuring their viability.
- A stay of up to four months extendable to up to 12 months to support negotiations of a restructuring proposal, which should prevent individual enforcement action and include rules preventing the withholding of performance, termination, acceleration or modification of essential contracts.
- An ability to cram down dissenting classes of creditors.
- Adequate protection for financing needed to allow the business to survive or to preserve the value of the business pending a restructuring, and for new financing necessary to implement a restructuring plan.
- Provision for honest, insolvent entrepreneurs to have access to a procedure that can lead to a full discharge of their debts (subject to limited exceptions) within three years.
Implementation in Greece
The EU Directive on Restructuring and Insolvency has been transposed into the Greek legal order pursuant to Law 4738/2020, effective as of 1 March 2021.
Recognition of foreign insolvency processes
EU Regulation on Insolvency Proceedings
The EU Regulation on Insolvency Proceedings1 applies to all EU Member States except Denmark and requires that certain collective insolvency proceedings, which are listed in Annex A to the Regulation, occurring in one EU Member State are automatically recognised in all other EU Member States and that each EU Member State automatically recognises the powers and authority of an insolvency practitioner appointed in another EU Member State.
Recognition of third country insolvency processes
- In order for a foreign insolvency process to be recognised in Greece an application is required before the court that would be competent in case of a Greek insolvency proceedings.
- The foreign insolvency administrator has the right to submit an application for recognising a foreign insolvency process.
- Among others, the foreign insolvency administrator needs to declare before the Greek court all pending insolvency procedures that he is aware of. Notwithstanding its right to object on public interest grounds, the court declares the recognition of a foreign insolvency procedure after confirming compliance with the law.
Insolvency changes in response to COVID-19
The Greek insolvency framework was entirely restructured in order to consolidate pre-existing procedures, transpose the EU Directive on Restructuring and Insolvency, and modernise existing processes. Though COVID-19 related considerations have been integrated into these recent amendments in order to provide for a second chance for viable businesses and to wind-down insolvent businesses in a timely manner, there are no COVID-19 specific legislative amendments beyond what has been discussed above.
Law stated as at 9 August 2021.
Contact: Orestis Omran
1 Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast).