Sergiu Selevestru- state counsellor
grade III in State tax service authority, member of
Management Board in
National Centre for
Training  "MOLDINSOLV"

In this article we aim to familiarize the business environment with some of the provisions of the Insolvency Law no. 149/2012 (hereinafter – Law nr.149/2012). It will highlight the rules that offer sufficient remedies for entrepreneurs in financial difficulty but want to save their business.
 
The Republic of Moldova is going through a rather difficult period of time from an economic point of view. As might be expected, businesses which have not yet been able to fully recover from the post-pandemic crisis, but they face other crises caused by military actions in Ukraine and rising energy prices are also affected. Under these circumstances, so that entrepreneurs are not paralyzed by the risks they are exposed to, the authorities should provide them with the necessary support in order to effectively manage unwanted situations that may arise, including solutions to overcome financial difficulties.
In the context of the above, the legislation of several countries is of interest, which comes to the aid of business through remedies to solve the problem of debts based on extrajudicial informational means. Such practice is common in EU member countries. For example, when such situations occur, in advanced jurisdictions such as France, Poland, Romania, etc., some pro-debt orientation procedures are applied, aimed at restoring the debtor's solvency in order to prevent its bankruptcy.
In France, these procedures have the name "safeguard procedure" (procédure de sauvegarde), "accelerated safeguard" (sauvegarde accélérée) or "ad-hoc mandat".
In Poland such procedures are called "procedure for approval of the preventive agreement" (postępowanie o zatwierdzenie układu), "accelerated procedure of the preventive agreement" (przyspieszo- ne postępowanie układowe), “ arrangement procedure ” (postępowanie układowe), “ remedial procedure ” (postępowanie sanacyjne).
In Romania, the proceedings in question are known both as' preventive agreement' and as' ad hoc mandate '. The "Preventive Arrangement" involves the conclusion of a contract between the debtor in financial difficulty, on the one hand, and the creditors who hold not less than 75% of the value of the accepted and uncontested claims, on the other hand, approved by the syndic judge. By the respective contract, the debtor sets out a plan for the recovery and realization of the claims of the mentioned creditors, and the latter agree to support the debtor's efforts to overcome the difficulty they find themselves in.
As for the "ad hoc mandate", this is a confidential procedure, initiated at the request of the debtor, whereby an ad hoc trustee, appointed by the court, negotiates with the creditors in order to reach an agreement between one or more of them and the debtor in order to overcome the state of difficulty of the entity.
It is also worth highlighting the current European interest in preventive agreement and prevention measures in the business domain. Such countries as France, Belgium, Greece, Great Britain, Germany, Italy and Poland give much greater practical attention to preventive measures aimed at avoiding insolvency situations. We could say that prevention in business is intensely promoted,  especially the adoption of Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019[1], which contains a series of measures that can save companies from an incipient stage of difficulty or save a higher value in the company, is an eloquent proof in this regard.
A similar procedure exists in Republic of Moldova, being available for entities that, in the circumstances mentioned above, face financial difficulties, but aim to:

• overcome the difficult situation and save the business;
• to free themselves from the pressure of overdue debts;
• to suspend the enforcement actions initiated by the creditors;
• suspend the calculation of penalties and/ or interest;
• remain in control of the business;
• strive for the business to become profitable again;
• regain the trust of business partners.

In order to achieve the nominated goals, the "Accelerated Restructuring Procedure" may be applied, regulated by the provisions of Section 5 of Law nr.149/2012. Namely, this procedure is meant to protect the entities in the country in financial difficulty, in order for them to continue their activity, to keep their jobs and to settle their debts by applying a complex plan of measures necessary to remedy the financial and economic situation.
However, we must admit that very few local entities have appealed to the accelerated restructuring procedure. We believe that such a situation is due, first of all, to the lack of knowledge of the respective procedure by businessmen, both due to the lack of information in the public space about the ways of business remedies in crisis, and due to the lack of an entrepreneurial education, which would allow stranded entities to admit their mistakes and overcoming the fear of being condemned by society.
Within the accelerated restructuring procedure, a particularly important role also belongs to the appointed provisional administrator (insolvency administrator), who, in addition to the extensive experience in the field of insolvency, must have knowledge and professional qualities in the field of negotiations. Given this fact, through the magazine "Accounting and Audit", the publications of which constitute for the business environment of the Republic of Moldova an indisputable informative support, the National Training Center "Moldinsolv" (hereinafter – the Center "Moldinsolv") aims to inform interested persons about the "accelerated restructuring procedure". Some templates of documents (acts) are attached to this article, thus facilitating the application of the respective procedure in practice by entities. Comments will also be provided on the following topics:

• under which conditions the accelerated restructuring procedure is applied;
• how and by whom the accelerated restructuring procedure is initiated;
• what are the effects of the filing and admission by the court of insolvency of the notification regarding the initiation of negotiations with the creditors;
• what are the necessary steps for the approval by the creditors of the accelerated restructuring plan;
• what happens if the creditors accept the plan;
• what happens after the accelerated restructuring procedure;
• what the Contractor obtains by approving the plan of the accelerated restructuring procedure.

Before going directly to the comments, we consider some concretization necessary, as the notions of "insolvency" and "  financial difficulty"are often confused. Insolvency is a financial situation of the debtor characterized by its inability to honor its payment obligations through default and over-indebtedness. Thus, the incapacity to pay assumes that the debtor cannot perform its pecuniary obligations due, including tax obligations. It is important to know that default is presumed if the debtor is overdue for more than 60 days.
At the same time, the financial difficulty characterizes the situation in which the debtor, although it executes or is able to execute the obligations due, is in imminent state of insolvency.
Initially, the entity may face financial difficulty, and failure to take timely measures to recover it-inevitably leads to insolvency. In this context, note that the entity is entitled to initiate the accelerated restructuring procedure during the period of financial difficulty, which is relatively short, until it reaches the state of insolvency.
Under what conditions does the accelerated restructuring procedure apply?
The accelerated restructuring procedure involves some limits[2]:

• only applies to debtors in financial difficulty;
• the debtor may submit the accelerated restructuring notification before the end of the 30-day deadline for submitting the application for insolvency proceedings;
• cannot submit the accelerated restructuring notification the debtor who, in the last 5 years before submission, has been subject to such a procedure or who, at the date of submission, is in the process of insolvency.

Based on the above, we also mention the need to periodically analyze the economic and financial situation of the entity, especially the liquidity of the balance sheet.
How and by whom is the accelerated restructuring procedure initiated?
The accelerated restructuring procedure is initiated by the debtor in financial difficulty, by submitting to the insolvency court a notification regarding the initiation of negotiations with creditors.[3] For the purpose of guidance , in Annex no. 1 to this article, a model of the Notification on initiation of negotiations with creditors[4] is attached.
By that notification, the debtor informs the court about the initiation of negotiations with creditors of a plan of the accelerated extrajudicial restructuring procedure and is entitled to request the insolvency court the following:

• suspension of the cross-borders enforcement of the debtor's funds during the negotiations for a period not exceeding 2 months;
• appointment of a provisional administrator who will assist him in negotiations with creditors.

Regarding the identification by the debtor in financial difficulty of the candidate of the provisional administrator, it is known that the respective person is to hold the authorization issued by the Ministry of Justice for practicing the activity of insolvency administrator. Their list is placed on the website of the Ministry of Justice under the heading "Professions and legal services", subheading "Legal professions"[5] or can be viewed on the website of the "Moldinsolv" Center.[6]
We are of the opinion that in the case of applying the accelerated restructuring procedure, the negotiation process is a fundamental one for the successful implementation of this procedure, and the debtor in financial difficulty needs to resort to professionals in the field to conduct professional negotiations with creditors.
We also draw attention to the obligation to attach to the aforementioned notification the documents confirming that the debtor is indeed in a situation of financial difficulty and that failure to take safeguard measures would irremediably lead to its insolvency.
What are the effects of the filing and adjudication by the insolvency court of the notification regarding the initiation of negotiations with creditors?
The effect of the submission by the debtor in financial difficulty of the notification regarding the initiation of negotiations with the creditors[7] will be expressed by the fact that:

• the applications for the initiation of the insolvency process filed by the creditors against this debtor, after the notification has been filed, shall be returned without examination;
• no later than 3 working days from the date of submission of the notification, the insolvency court shall adopt ex officio a decision on the suspension of forced executions;
• during the suspension, the debtor will continue to exercise his administrative right, focusing its effort on negotiating with the creditors and approving a plan of the accelerated restoration procedure.

Particularly important in this context is the fact that if at the expiry of the suspension period indicated in the court's conclusion (which does not exceed 2 months) the negotiations with the creditors fail and a plan of the accelerated restructuring procedure is not approved, the debtor is obliged to submit the application regarding the initiation of the insolvency proceedings against itself[8]. Also, if the negotiations fail, any of the creditors will have the right to submit the introductory request regarding the initiation of the insolvency proceedings.
What are the necessary steps for creditors to approve the accelerated restructuring project plan?
We believe that this is the most difficult aspect, to be analyzed and treated with particular seriousness. Thus, all aspects will be considered from the point of view of the creditors and the specificity of the debtor's activity will be taken into account, focusing on the professional qualities of the insolvency administrator in the field of insolvency, his/her professional mediation skills and negotiation qualities, including the personal knowledge of the debtor in the part related to the previous communication with the representatives of his/her creditors.
In order to increase the chances of approval of the accelerated restructuring procedure, we recommend taking some steps, such as:

• identifying the cause of the problem (s) that generated the created situation;
• verifying the claims (debtor debts) and establishing the priorities for their recovery;
• identifying and establishing a limited date or at least a deadline within which the payment will be made, in order to count on it in the drawn up plan;
• offering the discount to those who make payments earlier than in the usual term. Although such a "promotion" costs, in times of cash flow[9] crisis it is a very effective lever to accelerate receipts;
• setting up a deposit or, better said, a reserve of money. The amounts may be intended for future projects, but are a short-term source for the payment of salaries or debts to suppliers;
• analyze the cash flow report, with the coverage of salary payments, and then establish the debts to suppliers, proposing them the settlement by plan according to priorities;
• in relations with creditors we do not carry out promises that we cannot keep;
• assessing employees, we are not in a hurry to make redundancies, but we must have the correct number of employees in relation to the workload;
• informing the team about cash flow problems, being receptive to suggestions/ideas from colleagues/employees;
• if we rent the office/room, we will discuss with the owner of the location about a postponement of the rent payment. Given that the search for a new tenant requires time and money, the extension of the payment period can be negotiated.

It should be noted that the accelerated restructuring plan is to contain relevant information in this regard.[10]
What happens if the creditors agree to the restructuring plan?
If, following extrajudicial negotiations, the creditors accept the plan of the accelerated restructuring procedure proposed by the debtor, the latter submits an application for the initiation of the accelerated restructuring procedure.
For the purpose of guidance for interested persons, in Annex no. 2 is presented a model of the Application for the initiation of the accelerated restructuring procedure[11].
The effect of the submission to the insolvency court of the application by the debtor who managed to persuade his creditors to accept the proposed plan, under the legal norms[12], will be externalized by:

• the insolvency court shall be obliged to admit the application lodged under the terms of the Code of Civil Procedure and the Law no. 149/2012[13];
• no later than 3 working days from the date of filing the application, the insolvency court shall adopt ex officio a conclusion on its admission and on the initiation of the accelerated procedure for the restructuring of the debtor;
• the insolvency court will put under observation the debtor by appointing a provisional administrator, if he was not appointed according to art. 219 (5) from the Law no. 149/2012 and shall order the application, in accordance with art. 24 of this Law, of certain insurance measures[14];
• the insolvency court shall determine the date and time of the meeting of claims, as well as the date and time of voting the restructuring procedure plan.

Please note that, mandatory, upon the application for the initiation of the accelerated restructuring procedure of the debtor, in accordance with art. 17, art. 20 (2) and art. 220 from the Law no. 149/2012 he needs to attach the following documents[15].
What happens after the initiation of the accelerated restructuring process?
Subsequently, after the insolvency notice regarding the initiation of the accelerated restructuring procedure was issued, the debts settlement assembly and the voting assembly of the restructuring procedure plan shall beheld[16].
Upon acceptance by the creditors' assembly of the accelerated restructuring procedure plan, the insolvency court shall immediately, but no later than within 5 days, confirm the plan by final decision, order the termination of the accelerated restructuring procedure of the debtor and proceed to the procedure for the implementation of the confirmed plan.
The insolvency court confirms the plan of the accelerated restructuring procedure in the case of:

• creditors affected by the plan and who have resisted the plan shall be subject to fair and equitable treatment by the plan;
• creditors not affected by the plan are paid in the ordinary course of business of the debtor and the plan does not affect their rights without their consent.

What does the entrepreneur achieve by approved Accelerated Restructuring Procedure Plan?
From the moment of adoption of the decision to initiate the accelerated restructuring procedure and to continue the implementation of the respective plan, the debtor reverts to the right of administration, carrying out its activity within the limits of its ordinary business, under the terms of the plan.
The claims and rights of the creditors and other interested parties are amended according to the provisions of the plan. Respectively, the debtor is legally relieved of the difference between the value that the obligations had before the confirmation of the plan and that provided in the plan[17].
During the implementation of the Accelerated Restructuring Plan, no insolvency or bankruptcy proceedings may be initiated against the debtor.
No service provider (electricity, gas, water, telephone services, etc.) has the right, during the implementation period of the restructuring procedure plan, to change, refuse or temporarily interrupt a service to the debtor or to the debtor's estate if the debtor is a captive consumer, according to the law[18].
The insolvency court may order the debtor to lodge a security deposit with one of the banks, as a condition for obliging the provider to give services during the examined procedure. Such bail may not exceed 30% of the cost of the services provided to the debtor and not provided after the opening of the procedure.
We also note that if, during the execution of the plan of the accelerated restructuring procedure, the debtor violates the conditions of the plan and/or the deadlines provided in the debt settlement program or does not ensure the reservation of the debtor's estate for the claims provisionally passed, each creditor is entitled to submit to the insolvency court an introductory action, which will have the effect of entering into bankruptcy and liquidating the debtor's estate without the need for proof of its insolvency.
Nevertheless, we hope that this article will determine creditors and debtors to use the opportunity offered by law, trying to solve their financial problems without resorting to the insolvency procedure. In addition, entities currently in financial difficulty will be encouraged to confidently resort to such mechanisms to save their businesses. The earlier entrepreneurs turn to professionals and ask fro help, the greater the chances of safeguarding.