With news from various parts of the world pointing to the uncertainty in economics, a quick insight on Polish insolvency regulations appears justified (even if forecasts as to economic growth in Poland are optimistic).
Pursuant to Article 11 Sec. of the Bankruptcy and Rehabilitation Law (Journal of Laws No 60, Item 535, as amended) of February 28 2003, a debtor is deemed insolvent if it does not satisfy (discharge) its due and payable obligations. A business entity (company, corporation, and so on) will also be deemed insolvent if the value of its liabilities exceeds the value of its assets, even if it performs its obligations duly and in a timely manner.
If any of the above occurs, then – within two weeks – the debtor itself (its managers) is obliged to apply for a declaration of bankruptcy to a commercial (bankruptcy) court. Creditors of the debtor, who are not being satisfied in timely manner, as well as (depending on the legal nature of the debtor) its shareholders, liquidators or, in relation to state-owned entities, the state treasury, are also entitled to apply for a declaration of bankruptcy.
Depending on the standing of the debtor as well as the chances of satisfaction of the creditors, the court will decide on the type of the insolvency procedure to be applied in relation to the given debtor. Polish law provides for two types of insolvency procedures: (i) arrangement bankruptcy and (ii) liquidation bankruptcy.
The main difference between these two types of proceedings is that liquidation bankruptcy is aimed at satisfying creditors through the liquidation of assets of the debtor (bankrupt), whereas in an arrangement bankruptcy the indebtedness of the debtor is restructured and satisfied (usually to a limited degree) in accordance with the arrangement made between the debtor and its creditors; the debtor survives the bankruptcy unless it fails to properly perform the arrangement.
In the case of a liquidation bankruptcy the debtor (bankrupt) is deprived of the management of the business and the control is exercised by the court receiver (syndyk). In the case of an arrangement bankruptcy, depending on the decision of the court, the debtor may either retain control of the business (under supervision of a court supervisor (nadzorca s_dowy)) or control may be transferred to a court-appointed administrator (zarz_dca). The competences of the administrator in arrangement bankruptcy are similar to those of a court receiver in liquidation bankruptcy.
Borys D Sawicki