- Initiating reorganization
- Reorganization decision
- Reorganization plan
- Fulfilling the reorganization plan
Reorganization (restructuring) of a company helps the company to avoid bankruptcy proceedings and liquidation.
Reorganization is meant above all for companies whose activities could be made better through restructuring – new procurement opportunities, reducing number of staff, finding new markets etc.
Reorganization proceedings take place in several stages. The proceedings must be initiated by the company or entrepreneur itself. If bankruptcy proceedings have already been launched against a company or a court ruling has been issued regarding compulsory dissolution of a company, reorganization may not be launched.
To initiate reorganization, a reorganization petition must be submitted to a county court. In addition, the annual report for the previous year, an overview of the financial status and list of debts must be submitted. As an entrepreneur, you have the obligation to assist in the reorganization process and to give the court and the reorganization adviser the information necessary for the proceedings. Otherwise, the court may terminate proceedings.
After the petition is submitted, the court initiates the reorganization decision, listing:
- data on the person appointed reorganization adviser
- term for adoption of the reorganization plan
- term for submission of the reorganization plan to the court (within 60 days)
- amount payable by the undertaking for covering the remuneration for the reorganization adviser and payment term
Until the approval of the reorganization plan or termination of reorganization proceedings, the court may suspend most of the monetary demands against your company.
After proceedings are initiated and creditors are sent a notice, the reorganization adviser puts together a reorganization plan including, inter alia, a description of the company’s financial condition, analysis of reasons, terms for discharging creditors’ demands, expected economic situation after reorganization, impact on the company’s employees and terms for compliance. The adviser shall send the draft reorganization plan to the creditors for inspection. The creditors shall either approve or refuse the plan by a vote. The court shall then approve or refuse the plan. The court may in certain conditions and on the basis of expert evaluation approve a refused reorganization plan. If the court refuses the plan, the reorganization proceedings will be terminated.
Fulfilling the reorganization plan
When the reorganization plan has been approved and you begin implementing it, the reorganization adviser shall perform supervision and continue providing guidance to you if necessary. Every half-year, the adviser will prepare a report for both creditors and the court regarding fulfilment of the reorganization plan. The reorganization proceedings shall end when the reorganization plan has been fulfilled as required.