Slide 1: A Romanian view on: Tracing, Securing, Realising and Selling Single Assets


Slide 2: Topics: The legal frame of insolvency in Romania The actors on the insolvency scene The Main stages of the proceedings The activities related to our theme Case study


Legal frame of insolvency : Legal frame of insolvency


Legal frame of insolvency : Legal frame of insolvency


Legal frame of insolvency : Legal frame of insolvency The framework regulation for reorganizations and bankruptcies of commercial agents and persons is the Law no.85/2006 The law 85 is completed by the Law no.254/2007 that regulate the activities of Insolvency Practitioners The Law 85 followed the Commercial Code of 1887 revived in 1990 and the Law no. 64/1995 being closer to the EU standards than the older versions


Legal frame of insolvency : Legal frame of insolvency The financial recovery and bankruptcy of insurance companies is regulated by Law no. 503/2004. Other regulations The bankruptcy of credit institutions is governed by Ordinance no.10/2004.


Actors on insolvency scene : Actors on insolvency scene The debtor can be: any Commercial company, Cooperative, Economic association, other business entities in distress Sole proprietors working alone and Family enterprises The debtor is reprersented by: the Special Administrator. preparing a reorganisation plan or only representing the debtor


Actors on insolvency scene : Actors on insolvency scene The creditors are grouped in four main categories: Secured creditors holding mortgages and/or different pledges on the debtor assets State creditors claiming for unpaid taxes, fees, contribution to funds Trade creditors (unsecured) Employees existing and former for the unpaid wages in the last 6 month The creditors are represented by: General Creditors Assembly Creditors Commitee


Actors on insolvency scene : Actors on insolvency scene The court is the ordinary second instance (tribunal) to which belongs the location or domicile of the debtor. The insolvency (sindic) judge is appointed by the court president and conducts the proceeding independently


Actors on insolvency scene : Actors on insolvency scene The insolvency practitioner is appointed by the insolvency judge to administrate the insolvent enterprise and confirmed or replaced by the Creditors Assembly Depending on the insolvency stage the practitioner may be: Judicial administrator (observation and reorganisation stage) trying to imporove the financial situation of the debtor or Judicial liquidator (bankruptcy stage) in charge to realise the most cash from the debtor’s assets


Main stages of the proceeding : Main stages of the proceeding Common (General) Insolvency Proceeding Simplified Insolvency Proceeding Opening of the proceeding and appointment of the practitioner Surveil-lance period Reorgani-sation stage Bank-ruptcy stage Closing of the proceeding Bankruptcy proceeding


Activities related to our theme : Activities related to our theme Tracing assets Case of cooperating debtor: The debtor present the complete list of assets in 10 days after the proceeding opening at his will or after the notification by the practitioner Case of non-cooperating debtor: The debtor is not found or The documents are missing, incomplete or irrelevant therefore … The practitioner becomes detective collecting all information related to the debtor from public entities In any case to reconstruct the patrimony the practitioner may file with the syndic judge cancellation of fraud deeds concluded by the debtor three years before proceeding opening


Activities related to our theme : Activities related to our theme Securing assets The assets of the debtor being known, the practitioner: Inspects the assets and make the inventory of them Organises the preservation of the assets, Sealing and guarding them with specialized staff and insuring the assets against destruction or degradation For the land and buildings registered in the Land Register, he notify the opening of the insolvency proceeding to this register to avoid any transaction with these assets without his knowledge and approval. The cash remained in different account is frozen by the notification of all the banks about the opening of the proceeding


Activities related to our theme : Activities related to our theme Realising and selling assets The realisation of the debtor’s assets is done by the practitioner under the supervision of the syndic judge and starts immediately after throwing away of the inventory. The asking price of the assets is established on the basis of the valuation done by external experts hired by the practitioner and is approved by the creditor’s assembly. The valuation report must propose prices for the whole patrimony, the sole assets and blocks of assets working together. To maximize the value of the debtor’s patrimony, the practitioner must expose the assets on the market, organizing an efficient marketing campaign. The selling method can be auction, direct negotiation with a known buyer or not or a mix of the two methods. Even in the case of direct negotiation with a known buyer, the law 85 preserve the principle of the competition providing, in this case, a stage of super-offering. The standings of the sell are also presented by the practitioner and approved by the creditor’s and agreed by the syndic judge.


Case Study : Case Study Insolvency proceeding of STAR Bucharest SRL or Why the Insolvency practitioner must be … Detective


Appearance at the opening of the proceeding : Appearance at the opening of the proceeding The constitutive and financial documents was not found. The administrator was missing. The seat address did not cores-pond to the one registered with the Register of Commerce. No assets registered in Bucharest. Debtor eligible for the simplified proceeding because: Nothing !


First conclusions of the practitioner : First conclusions of the practitioner The debtor was registered in Bucharest only one year before the opening of the proceeding. The shareholders was two foreign citizens that left already Romania The equity was important (70.000 EUR) The object of activity was DIARY The debt to the public budgets was important (250.000 EUR) comprising taxes and excise duties The information was collected from the Ministry of Finance, local authorities, local Trade register, inspection of the seat


Questions and inconsistencies : Questions and inconsistencies If the company accumulated a large historical debt, it was NOT established one year ago in Bucharest. It was transferred here from somewhere in Romania. If the liabilities and the equity are important there are somewhere some assets. If the output was diary there was no excise duties. Some things did not fit and the practitioner tryed to find the answers as a detective. He concluded:


On the trails of the debtor : On the trails of the debtor The company was transfered from Radauti (a town 500 km North of Bucharest). It was established 10 years ago by five Romanian citizens Produced alchoolic beverages (a very good explanaition for the excise tax). The practitioner asked for complete historical information from the Office of the National Trade Register and found:


On the trails of the debtor : On the trails of the debtor A spirit factory A headquarter villa A shop in the Central Market of the town and 19 trucks (not found) The local authorities in Radauti reveled that the debtor was registered with: The real estates was secured, realised and sold by the practitioner The debts were repaid only 52%, but the result was obviously better than the initial assumption (0%).


Slide 21: Thank You for Your Attention !