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From fall the famous Article 99 of the Bankruptcy Code will remain in history since yesterday the Ministry of Development, Competitiveness and Shipping submit a vote in Parliament to amend the new framework of Chapter 6 of 3. 3588/2007 (the Bankruptcy Code). 

The new in the provision is that it allows the entry in pre-bankruptcy procedure and the debtors, who are already in the process of suspension of payments, since it is estimated that for those debtors pre-bankruptcy procedure can lead to better results than the actual bankruptcy. The proposed regulation combines the positive elements of the removed provision of Art. 44 3. 1892/1990 (especially the obligation for minority) and the provisions of the Bankruptcy Code (a compromise procedure). 

The new framework was introduced with the bill "Establishment of an independent authority for public contracts and a central electronic register of public contracts - amending Chapter 6 of the 3. 3588/2007 Pre-bankruptcy recovery procedures and other provisions." Besides the possibility of rescuing the companies that have financial problems, the bill provides for the establishment of an independent supervisor of public contracts for supplies and activities, but also the creation of committees for the amicable agreement to reduce the rents of stores due to the crisis. 

Other provisions of the bill extend with five years the contracts for cinema rental and theater halls, a possibility is given to extend the lease of state property, occupied by hotels, up to 12 years of their expiration, reducing the annual rent of 6 percent to 4.8 percent of fair value, and licenses are renewed for the participation in the Sunday market in Piraeus. 

Pre-bankruptcy procedure 

According to the Ministry of Development, with the proposed institutional arrangements, Chapter 6 of 3. 3588/2007 (Bankruptcy Code) is amended and is converted in such a way that gives a real second chance to companies that have financial problems for whatever reason. So, pre-bankruptcy recovery procedure is introduced for one company and the possibility to save it before it bankrupts is increased, which means its automatic discrediting. 

The new element contained in this regulation is the rapid redefining of the relationship debtor-creditor, by signing a contract for recovery, which aims to minimize the resulting losses. Thus limiting the period of uncertainty about the survival or death of the company.

This provision is expected to heal and to continue to operate businesses that are viable in terms of their field of activity, but with liquidity problems because they are indebted. 

The benefit of this transformation, especially in this difficult economic environment, is significant because it maintains jobs in the company and in other companies as well. 

The main features 

1. Introduced is the possibility to involve discordant creditors, thus deciding the aforementioned "collective action problem." 

2. Provided is the greatest possible flexibility in drawing up a contract. In particular, it allows, based on a French model, for the debtor and the creditor to reach agreement without formal negotiations but with confidential ones, so as to avoid, where feasible (usually when creditors are few and collaborate) creation of uncertainty about the survival of the company, which today happens during the procedure to reach a compromise. In the case of an elected procedure of formal negotiations, within the recovery procedure, given are two options – either for the creditors to sign the contract straight away or to convene a meeting of creditors. The second, "more severe" procedure is expected to be used in cases where there are many creditors that are difficult to coordinate their actions in any other way. 

3. Moreover, while institutionalizing the obligation of the state and the agreement of the social compromise bodies, as a precondition for its success are taken into account and ensured their interests through their compulsory summons for the procedure. 

As regards to the content of the remedial contract (Article 106e, paragraph 1), given are wide powers in the parts indicative of the possibility of using various means, from the lightest (i.e. just an extension for repayment of debt) to the most drastic (i.e., capitalization of debts or transfer of the company), so as to cover all cases, as far as possible, depending on how big the problems of the company are. 

What changes come with the new regulation 

The operation for the rescue of the company will no longer be in the context of bankruptcy since in the country bankruptcy is connected, from economic and social perspective, with the liquidation and in result the attempts to restructure under bankruptcy is underestimated by the discrediting of the company in the eyes of its customers and suppliers. 

It should be noted that the Bankruptcy Code, valid until today, on one hand provides for the pre-bankruptcy stage procedure to achieve a compromise, but without the contract resulting from this procedure to bind dissenting creditors. Thus creates what in economics is called "problems of collective action." That is, even if all creditors recognize that a regulation of their demands, which will save the debtor, will benefit the collective interest, any individual can hope that other creditors will bear the costs of regulation and will rehabilitate the company of the debtor, but without that creditor baring the negatives of the regulation. Therefore, it is noted that while many companies begin proceedings under Art. 99 and the next, very few companies have agreed with the creditors and actual recovery. 

Moreover, when the court announces bankruptcy, if it considers that an agreement can be reached, that present are reasonable expectations of success of the proposed rescue and the collective satisfaction of creditors is not violated, decides to proceed with the recovery process for a period not greater than 4 months after issuance of the decision. The chairman of the court may extend this period for another one month at the request of the debtor, creditor or the agents. 

How to ensure the protection of creditors 

The need to save the company does not oppose, but rather is entirely consistent with the interests of creditors, since creditors will generally be more content from an operating company rather than a forced sale of its property. 

In the few cases where the sale of assets is more favorable to creditors than the rescue of the company, comes when companies are non-viable in the medium term and rescue attempts are not socially and economically justified because the company is condemned to failure. 

Therefore, as a criterion to initiate reorganization procedure is determined not to violate the collective satisfaction of creditors. Thus, the new regulations are harmonized with the objectives of the Bankruptcy Code. Especially in cases where rescue agreement is possible, but the success of the company is more likely through the sale of all or parts of it, returns the special law for liquidation. 

It should be noted that in order to avoid unfair results the bill provides essential criteria for the ratification of the contract. For instance, it provides that on the basis of the contract, creditors should not find themselves in a worse position than that in which they would have ended up if the debtor goes bankrupt.