Romania

A look at corporate, personal and, where relevant, partnership insolvency proceedings in Romania, 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.


Mandat ad-hoc

Ad hoc mandate / Debt restructuring procedure

  • A confidential and mainly out-of-court procedure through which a debtor in financial difficulty may negotiate with its creditors, via an agent (mandatar ad-hoc), in order to reach an agreement to overcome its financial difficulties.
  • The agent must be an insolvency practitioner and is appointed by the court. They may advance restructuring proposals to creditors and an agreement must be reached within 90 days. 
  • The company remains in control of its assets throughout. 
  • Secured creditors that are not part of the procedure may enforce their security.

Concordat preventiv

Preventive composition

  • Comprises an agreement between a debtor in financial difficulty and creditors holding at least 75% of accepted and uncontested claims, through which the debtor proposes a restructuring plan. 
  • The agreement must be approved by the court (syndic judge) which may decide that creditors who did not accept the restructuring plan and therefore did not sign the agreement should reschedule their claims for a maximum period of 18 months without charging interest, penalties or other charges (except for financial contracts, e.g. forwards, swaps). 
  • The entire procedure is conducted by a composition receiver (administrator concordatar), appointed by the court and selected from a list of insolvency practitioners. 
  • All enforcement actions commenced by creditors (including secured creditors) are suspended. 
  • The procedure may last up to 24 months extendable for another 12 months.


Insolventa

Insolvency proceedings

  • Commenced at the request of either the debtor or any of its creditors. The debtor is presumed to be insolvent if it has not paid its debts for a period of at least 60 days of a debt becoming due and the debt amounts to at least RON40,000 (approx. EUR9,000). 
  • If the debtor is responsible for initiating the proceedings then the amount the state claims against it must be less than 50% of the value of all the declared claims against that debtor. 
  • On opening the proceedings, evidence should also be provided proving that the tax authority was informed. Failure to do so will result in the request being rejected. 
  • Following a court decision to commence the proceedings, the debtor enters an observation period until a reorganisation plan is approved or bankruptcy proceedings are commenced. 
  • The court may permit the debtor to administer its assets under the control of a court-appointed judicial administrator and under the control of the court (syndic judge) itself. In certain cases, the court may refuse to permit the debtor to administer its own assets, in which case the judicial administrator appointed by the court will have all rights of administration. During this period, creditors are required to file their claims. The debtor is represented by a special administrator appointed by the general meeting of shareholders.
  • All enforcement procedures commenced before the opening of the insolvency proceedings are suspended, including those started by the secured creditors.
  • Creditors may not rely solely on the insolvency proceedings as grounds for terminating contracts entered into with the debtor. 
  • Certain decisions within the insolvency proceedings are referred to a creditors’ committee of three or five creditors nominated by the creditors’ meeting from three classes of creditors (secured, unsecured and state claims). 
  • Creditors cannot be appointed as the debtor’s special administrator. 
  • The judicial administrator/liquidator/president of the creditors’ committee/any creditor holding more than 30% of the total claims may file a claim against those people responsible for the debtor’s state of insolvency. 
  • Law provides specific conditions for insolvency/bankruptcy of groups of companies, credit institutions and insurance companies and for cross-border insolvency.


Reorganizare judiciara

Reorganisation proceedings (part of insolvency proceedings)

  • If a reorganisation plan is approved as part of insolvency proceedings, the debtor will enter into a reorganisation procedure that may last up to three years.
  • A special administrator will conduct the debtor’s business in accordance with the reorganisation plan and subject to the control of a judicial administrator.
  • The reorganisation plan may provide, in certain conditions, for extinguishment of state tax claims and conversion into shares in the insolvent debtor. If the state claims are disputed and the court has not suspended their enforcement, those claims will be registered in the table of claims as contingency claims.

Faliment

Bankruptcy proceedings (part of insolvency proceedings) 

  • Bankruptcy proceedings can be commenced as part of insolvency proceedings in the following circumstances: (i) if the debtor applied for a simplified insolvency procedure; (ii) the debtor/its creditors/judicial administrator did not propose a reorganisation plan; (iii) the reorganisation plan was not approved; or (iv) the reorganisation of the debtor failed. 
  • Any creditor or the judicial administrator may file for the bankruptcy proceedings. The syndic judge shall decide whether the bankruptcy procedure is open. 
  • The procedure involves liquidation of all of the debtor’s assets. 
  • In the case of insurance/reinsurance companies, insurance policies automatically expire and all reinsurance agreements are terminated 90 days after the decision to open the bankruptcy proceedings.

Darea in plata a unor bunuri imobile

Mortgage discharge

  • An out-of-court procedure where the debtor transfers ownership of all mortgaged (residential) properties to the lender and in return is discharged from the outstanding loan and all accrued costs. 
  • If the procedure fails, the debtor may apply to court for an order regarding the mortgage discharge.  


Insolventa persoanei fizice

Natural person insolvency

  • A procedure for individuals whose debts do not arise from professional activities, where there is no reasonable prospect that the debtor will be able to meet their obligations within a maximum 12-month period. It seeks to maintain a reasonable standard of living for the debtor and their dependants. 
  • The procedure is conducted by an insolvency committee/administrator/liquidator and by the court, depending on which of the following procedures is followed.

1. procedura de insolvenţă pe bază de plan de rambursare a datoriilor

1. Insolvency procedure based on a plan for debt repayment

  • A natural person’s debt repayment plan is approved if creditors representing at least 55% of the total value of debts and 30% of preferential debts vote in favour of it.
  • If the proposed plan is not approved by creditors, the debtor can request the competent court either to confirm the plan or order the opening of an insolvency procedure based on the liquidation of the debtor’s assets.
  • Following the approval of the plan, all enforcement procedures initiated against the debtor are suspended, including those commenced by secured creditors.
  • Contracts that are ongoing when the insolvency procedure was opened must be maintained and cannot be terminated due to the opening of the insolvency proceedings.
  • If the insolvency committee determines that the plan for debt repayment cannot be fulfilled, it will submit the debtor’s/administrator’s request to the competent court.

2. procedura judiciară de insolvenţă prin lichidare de active

2. Insolvency court procedure based on the liquidation of the debtor’s assets

  • If the court approves an application to open proceedings based on liquidation of the debtor’s assets, it will appoint a liquidator.

3. procedura simplificată de insolvenţă

3. Simplified insolvency procedure

  • A simplified insolvency procedure can be applied to an insolvent debtor where: (i) the total amount of debts is equal to ten times the minimum wage; (ii) the debtor has no realisable assets or income; and (iii) the debtor is past the standard retirement age or retired early as a result of losing at least half of their capacity to work.

Procedura de executare silita

Enforcement proceedings

  • Enforcement proceedings can be taken in respect of both movable and immovable assets. They can take place out of court or via court proceedings. 
  • The out-of-court procedure applies to secured claims over movable assets only and subject to certain conditions.
  • In all other cases, the procedure is conducted by an enforcement officer selected by the creditor(s) from a list of local enforcement officers. They must give the debtor notice of the proceedings, informing them that they has a certain period of time within which to pay all their debts, including enforcement costs.  

Anticipated changes in the next two years

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. 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.

Contact: Marian Dinu


1 Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) 2017/1132.