Transactions within insolvency procedures are a crucial tool for resolving financial crises faced by companies in difficulty. In the Republic of Moldova, transactions between debtors and creditors can occur at any stage of the insolvency process, facilitating an agreement that benefits both parties and allows either a recovery or an efficient liquidation. The role of the insolvency administrator is to mediate these transactions, acting as a link between the debtor and the creditors involved in the process. As Crassin Dimitrov, an administrator from Bulgaria, stated: "My task is to organize cooperation among them, to form a team that will work in unison during the procedure... Otherwise, everyone will lose... Including myself."
Article 162 of the Insolvency Law provides that, at any stage of the insolvency process, the participants have the right to conclude a transaction. These transactions may involve various ways of settling debts, such as installment payments, deferment, or partial or full forgiveness. This type of agreement offers the debtor the chance to reorganize their business and regain financial stability.
Therefore, transactions in insolvency proceedings are more than simple agreements; they represent a process of mediation and balance, in which the administrator plays an essential role in guiding the parties toward an optimal solution.
Particularities of a Transaction in Insolvency Procedures:
There are a few steps involved in closing a transaction:

1. The decision whether to close a transaction is made by the meeting of creditors:

a)     With a simple majority vote of unsecured creditors;
b)    With the unanimous vote of secured creditors.
Representatives of creditors require special authorizations to sign the transaction.

2. Participation of the debtor in the transaction:
   If the debtor is in:

a)     Supervision period – the transaction is approved by its governing body (does not require AA approval);
b)    Insolvency or bankruptcy – the transaction is approved by the insolvency administrator/liquidator.

3. Participation of third parties in the transaction:
   Third parties are allowed to participate in the transaction, assuming the rights and obligations specified in the transaction.

Unilateral refusal to execute an enforceable transaction is not permitted.
Important! The transaction is confirmed by the insolvency court through a final decision, which orders the termination of the process.
Form of a Transaction:
Transactions are concluded in writing and signed by:

1. The person authorized to pass the decree to conclude the transaction, on behalf of the debtor;
2. The person authorized by the creditors' meeting where the transaction was approved, on behalf of the creditors;
3. The third party – personally or by their authorized representatives.

What Should a Transaction Include?
A transaction must contain:

1. Provisions regarding the manner and deadlines for settling the validated claims. The settlement of the debtor's obligations can occur through:
1. General payment;

b)    Compensation;
c)     Confusion;
d)    Total or partial forgiveness of the debt;
e)     Novation;
f)     Conversion of debts into shares in the debtor's statutory capital or into securities.
g)    Conversion of debts and other securities into shares.
The methods listed from (b) to (g) can only occur with the individual consent of the creditor, provided that they do not infringe on the rights of other creditors.

2. If the transaction provides for installment payments, deferment, or total or partial forgiveness of the debtor's debts, unsecured creditors of the 3rd and 4th ranks are obliged to accept the conclusion of the transaction. For validity, the transaction must be signed by the representatives of creditors with fiscal (budgetary) claims.

Principles for Signing the Transaction:

• Fairness: The settlement of claims in a non-monetary form should not create advantages over creditors whose claims are settled through monetary means.
• Equality: For creditors who voted against the transaction or did not participate in the vote, the conditions of the transaction must not be less favorable than those for creditors who voted in favor.
• Guarantees: Real guarantees applied to the debtor's assets may or may not be maintained until the transaction is fully executed.

Key Aspects:

1. A creditor who voted in favor has the right to fully pay off the debtor’s obligations or provide a loan to the debtor, which would allow the settlement of obligations to:

a)     A creditor who voted against the transaction;
b)    A creditor who did not participate in the vote.
The creditor who voted against or did not participate in the vote is obliged to accept the execution offered directly by the debtor.

2. The debtor’s associate (participant) has the right to fully pay off the debtor’s obligations or provide a loan to settle debts to:

a)     A creditor who voted against the transaction;
b)    A creditor who did not participate in the vote.
The creditor who voted against or did not participate in the vote is obliged to accept the execution offered directly by the debtor.

3. The debtor is obliged to promptly settle the validated creditors' claims using the borrowed funds.
4. The person who settled the claims for the debtor subrogates the creditor's rights for whom the payment was made.
5. The funds provided to the debtor for the settlement of claims are considered an interest-free loan, with a repayment term of one year from the termination of the insolvency process, which can be extended by mutual agreement of the parties.

Transaction Confirmation by the Court:
The confirmation of the transaction occurs no earlier than 5 days and no later than 10 days from the date of the transaction or the date the application for confirmation is submitted to the insolvency court.
The following must be attached to the application for transaction confirmation:
a)     The transaction;
b)     The creditors' meeting report that decided on the closing of the transaction;
c)     List of known creditors who have not submitted claims against the debtor, their addresses, and the amounts due;
d)     The validated claims table;
e)     Evidence of payment of the claims of the mass creditors and the claims of the first and second ranks;
f)      The decision of the debtor's governing body regarding the conclusion of the transaction, during the supervision period;
g)     Objections of the creditors who voted against the transaction or did not participate in the vote, if these objections were submitted in writing;
h)     Other documents.
The confirmation of the transaction takes place in a hearing with notification to the participants in the process regarding the date on which the respective request will be judged.
Attention: The absence of legally summoned persons does not impede the judgment of the application for transaction confirmation.
What Happens if the Confirmation of the Transaction Is Refused?
The confirmation of the transaction may be refused in the following cases:

1. Failure to fulfill the obligations of the mass and failure to settle the claims of first and second-rank creditors;
2. Violation of the procedure for concluding the transaction;
3. Non-compliance with the form of the transaction;
4. Violation of third-party rights;
5. Conflicts between the transaction conditions and the law or other regulations;
6. Grounds for absolute nullity as provided by civil law.

Attention: The refusal can be made through a decision, which can be appealed.
If the transaction is refused, the following situations may occur:

1. The transaction is considered not concluded;
2. The parties may conclude another transaction.

Annulment of the Confirmation Decision:
The annulment of the confirmation decision represents the cancellation or revocation of the court's decision that confirmed the transaction between the debtor and creditors in the insolvency process. This annulment can occur if certain conditions or legal provisions are violated, and its effects are significant.
What Happens Next?

1. The insolvency process reopens from the stage at which it ceased.

In case of reopening, the observation procedure, insolvency procedure, bankruptcy procedure, or restructuring procedure will continue from the last operation carried out by the participants until the issuance of the confirmation decision.
a)     The administrator/liquidator resumes their duties from the date of the process reopening;
b)    Creditors who participated in the transaction have the right to submit their claims against the debtor in the reopened procedure.

2. Claims postponed or staggered through the transaction are restored upon the annulment of the confirmation decision, at maturity in the part that has not been settled.
3. The debtor cannot demand the return of the sums paid to the mass creditors and the first and second-rank creditors at the date of the transaction conclusion.
4. Claims settled under the transaction are considered extinguished.
5. Creditors whose claims were settled under inequitable conditions that harmed other creditors in their legitimate rights and interests are obliged to return everything received under the transaction. The claims of the creditors who returned the execution of the transaction are restored in the claims table in the corresponding amount.
6. The notice regarding the reopening of the procedure must be published.

What Happens If the Transaction Is Revoked?
Important! The withdrawl of the transaction, confirmed by the insolvency court, by agreement between the debtor and some of the creditors, is not allowed.
The transaction may be revoked by:

1. The insolvency court:
   • Regarding all unsecured creditors – at the request of the unsecured creditor(s) who, at the date of the transaction confirmation, holds a quarter of the total amount of validated unsecured claims.
2. At the request of unsecured creditors:
   • In case of non-performance or a substantial breach of the transaction conditions by the debtor, harming the legitimate rights and interests of the creditors holding, in aggregate, a quarter of the validated unsecured claims.

Consequences of revoking it:

1. A new insolvency process is initiated against the debtor.
2. In the event of initiating a new insolvency procedure, the amount of the creditors' claims for whom the transaction was concluded is determined under the conditions provided by the transaction.

Article based on the presentation created by Selevestru Irina and Aurelia Irodoi.