Changes to the insolvency law

The state will from now on be able to take over shares in exchange for company debts

Leyla Cheamil, 28.09.2018, 12:24

The Romanian government has issued
an emergency decree to modify the insolvency law. According to Prime Minister
Viorica Dancila, the changes are meant to put an end to abusive practices such
as repeated insolvency seeking to evade the payment of obligations to partners
and the state budget. More than 6,000 companies employing over 64,000 people
are in insolvency at the moment. The government’s decree provides for the
conversion of debts into shares to be taken over by the state. The finance
minister Eugen Teodorovici says the tax authority will put in place a clear
procedure in this regard. The business community has criticised the measure
saying there’s no place for the state in a private company, while experts on
insolvency speak about masked nationalisation. Eugen Teodorovici has explained
that the changes to the insolvency law were meant to address the dysfunctions
triggered by the application of previous versions of the law:

These dysfunctions have caused budget arrears of more than 63 billion
lei (13.5 billion euros) from the companies in insolvency, while only 6% of the
sums owed to the body of creditors have been recovered. We can also add here
the arrears to the lending companies in the private sector. We must allow for
the conversion, reduction or transfer of the debts to the budget, under certain
circumstances, of course, in order to prevent the bankruptcy of many companies
with a real potential of recovery and other serious social and economic
consequences.

The finance minister has also said
that the regulations proposed aim to ensure the necessary conditions to allow
for the recovery of companies so that they continue to operate and thus protect
public funds through the recovery of the money owed to the state budget. The
main changes to the insolvency law also include greater responsibility for
insolvency administrators and more accountability for debtors in the management
of their companies. Other changes refer to the fact that the request to start
the procedure will be rejected if the National Agency for Fiscal Administration
has not been notified in this regard. According to data published on the
website of the National Trade Register Office, the number of commercial
companies and authorized natural persons in insolvency dropped by almost 2.5%
in the first 8 months of the year compared with the same time last year. Most
of them are in Bucharest, while the areas most affected by insolvency are
retail and wholesale trade and car and motorcycle repair services.

(Translated by C. Mateescu)