A Q&A guide to restructuring and insolvency law in Poland.
The Q&A gives a high level overview of the most common forms of security granted over immovable and movable property; creditors' and shareholders' ranking on a company's insolvency; mechanisms to secure unpaid debts; mandatory set-off of mutual debts on insolvency; state support for distressed businesses; rescue and insolvency procedures; stakeholders' roles; liability for an insolvent company's debts; setting aside an insolvent company's pre-insolvency transactions; carrying on business during insolvency; additional finance; multinational cases; and proposals for reform.
To compare answers across multiple jurisdictions, visit the Restructuring and insolvency Country Q&A tool.
This Q&A is part of the PLC multi-jurisdictional guide to restructuring and insolvency law. For a full list of jurisdictional Q&As visit www.practicallaw.com/restructure-mjg.
Common forms of security. The following security interests can be granted over immovable property:
Mortgage (hipoteka). This is the most common form of security over immovable property. A mortgage can be granted over real estate to secure an existing or future monetary claim, arising out of a specified legal relationship, up to a cap stipulated in the mortgage deed. The mortgage also secures claims for interest, collection costs and other incidental amounts up to the cap, provided these incidental amounts are identified in the mortgage deed.
A creditor can use one mortgage to secure various claims against the same debtor, and for several creditors involved in financing the same project to secure their claims under a single mortgage.
If a debtor defaults, the creditor can recover its debt by court enforcement proceedings, which enable a bailiff to sell the debtor's asset and satisfy unpaid debt before unsecured creditors are paid (see Question 4).
Transfer of immovable property for security (przewlaszczenie na zabezpieczenie). It is possible to transfer title to immovable property as security, with an obligation to transfer it back after the repayment of the debt, although this is rare. If a debtor defaults, the creditor can sell the transferred immovable property and recover its claim from the sale proceeds.
Formalities. The formalities are as follows:
Mortgage. The owner of the immovable property must declare the granting of the mortgage in notarial deed form (the declaration must be prepared by and executed before the public notary). The mortgage is created when it is registered in the relevant land register maintained by the appropriate court.
Transfer of immovable property for security. The agreement to transfer the immovable property must be in the form of a notarial deed, signed by both parties.
Effects of non-compliance. If the notarial deed is not used and executed correctly, the mortgage/transfer is invalid. The mortgage is not created if it is not registered in the relevant land register.
Common forms of security. The most common forms of security over movable property (including claims, such as receivables, and other contractual rights) are:
Pledge (zastaw). Movable property and claims (but not a pool of floating assets (see below)) can be pledged. If the debtor defaults, the creditor can recover its debt through court enforcement proceedings, which enable a bailiff to sell the asset and satisfy unpaid debt before unsecured creditors (see Question 4).
Registered pledge (zastaw rejestrowy). A registered pledge can be created over both:
specified assets (such as machinery); and
a pool of floating assets used for the debtor's business (such as the debtor's trading stock, movables and rights). In this case, the registered pledge is similar to a floating charge.
If the debtor defaults, the creditor can recover its debt through either:
court enforcement proceedings and sale of the asset by a bailiff;
out-of-court enforcement, if the pledge agreement so provides. This may be through either:
the creditor acquiring the pledged asset;
sale of the pledged asset by public auction; or
collecting the pledgor's income from its business (the business can be put into receivership or leased).
Statutory pledge (zastaw ustawowy). Certain categories of creditors can secure their claims by a statutory pledge (for example, to secure rent claims due for the previous year, a landlord has a statutory pledge over goods stored in its leased premises). Creditors can retain possession of an asset until their debt is paid. If the debt is not paid, the creditors have payment priority in court enforcement proceedings.
Assignment of rights (cesja na zabezpieczenie) or transfer of title to movables for security (przewlaszczenie na zabezpieczenie). This transfers title to certain assets from the debtor to the creditor for security (subject to conditions or an obligation to transfer the asset back to the debtor on payment of the debt). If a debtor defaults, the creditor can sell the asset and satisfy its claim from the sale proceeds.
Formalities. The formalities for security over movable property are as follows:
Pledge. This is usually created by an agreement and requires the pledgor to deliver the pledged asset to the pledgee (certain intangible assets such as claims do not require delivery). Agreements for certain types of assets may require specific formalities (for example, an agreement relating to claims must be in writing with a certified date). Usually the date is certified by the public notary, but it might also be certified by a state or local governmental authority.
Registered pledge. The parties must enter a written pledge agreement. The pledge is created on registration in the pledge register maintained by the relevant court. The pledged asset does not need to be delivered to the pledgee.
Statutory pledge. This is created automatically by operation of law. Therefore, no special formalities apply.
Assignment of rights or transfer of title to movables for security. This requires an assignment or transfer agreement. Agreements to transfer certain types of assets may require a special form (for example, an agreement to transfer shares in a limited liability company must be in writing with notarised signatures). If no special form requirement applies, the assignment/transfer agreement must be in writing with a certified date to be effective against the debtor's bankruptcy estate.
Effects of non-compliance. The effects of non-compliance are as follows:
Pledge. When delivery is required, the pledge is not created until the asset is delivered to the pledgee. If a special form is required and not used, the pledge agreement is invalid.
Registered pledge. A registered pledge agreement is invalid unless it is concluded in writing. The pledge is not created unless it is entered in the relevant pledge register.
Statutory pledge. Not applicable, as no special formalities apply.
Assignment of rights or transfer of title to movables for security. If a special form requirement is not observed, the agreement is invalid. In bankruptcy proceedings, agreements which do not require a special form are ineffective unless they are in writing with a certified date, and the claim becomes unsecured.
In liquidation (see Question 6, Bankruptcy), creditors' claims are satisfied in the following order of priority:
Secured claims. Generally, debts secured by pledges, mortgages or similar security interests are paid from the sale proceeds of the secured asset, less sale-related costs and other costs of insolvency proceedings up to 10% of the sale proceeds.
Secured creditors are paid under a separate payment plan, generally in the order in which the security is created. However, up to a specified maximum value, disability pensions and employees' salaries may also be paid from the sale proceeds of certain assets (such as immovable property, maritime vessels and so on).
Creditors secured by a registered pledge have special rights and can satisfy their claims by acquiring the pledged asset.
Unsecured claims. Unsecured creditors are generally paid in the following order of categories (proportionality rules apply within each category, and there are variations due to special types of bankruptcy proceedings, in particular for banks and insurance companies):
Category one. This includes:
the costs of the bankruptcy proceedings (including costs of running the bankrupt's business);
pensions for illness, incapacity to work, disability or death, due for the period after bankruptcy is declared;
claims resulting from the unjust enrichment of the insolvency estate;
claims arising from transactions entered into by a receiver/administrator;
amounts resulting from the acts of the bankrupt performed with the consent of the court supervisor or not requiring the supervisor's consent.
Category two. This includes:
claims resulting from employment agreements;
pensions for illness, incapacity to work, disability or death and claims of farmers due for the period before bankruptcy;
social security contributions together with interest and execution costs, due for the two-year period before bankruptcy.
Category three. This includes:
taxes;
public levies;
social security contributions not included in category two, together with due interest and execution costs.
Category four. This includes claims not covered by the above categories, together with interest due for the one year period before bankruptcy. Contractual damages, court proceeding costs and execution costs not in category five are paid here. Most unsecured creditors are satisfied under this category.
Category five. This includes interest due to creditors not satisfied in any preceding category (in the order of priority of the principal amounts), court and administrative fines, and amounts resulting from donations and legacies.
Shareholders. There are no special rules for repayment of the shareholders. Shareholder loans made to a company are not repaid if bankruptcy is declared within two years of the loan agreement, as these loans are considered contributions to the corporation's capital.
Trade creditors can use the following mechanisms to secure unpaid debts:
Retention of title clause. Sale agreements frequently contain retention of title clauses, under which the seller retains title to sold goods until it has received full payment. Generally, a retention of title clause is effective against the bankruptcy estate if it is in writing and has a certified date.
Blank promissory notes. In trade transactions, creditors sometimes secure their claims by way of blank promissory notes issued by the debtor. If the debtor defaults, the creditor can fill in the note and seek to redeem it. Creditors seeking payments based on promissory notes can use a fast track, simplified court procedure.
Guarantee. A third party (such as a bank or a parent company) can grant a guarantee to a creditor through a guarantee agreement. These agreements enable creditors to seek payment directly from the guarantor if the debtor fails to repay its debt.
The general rule is that creditors can only satisfy their claims from a debtor's assets through court enforcement proceedings conducted by a court bailiff (although the holder of a registered pledge or owner of assets transferred for security can also use out-of-court enforcement in relation to the relevant asset (see Question 1, Movable property)).
To initiate court enforcement proceedings and have the bailiff seize and sell the debtor's property, the creditor must obtain an execution title with an enforcement clause affixed by the court. The execution title can be one of the following:
Judicial decision or arbitral award. Generally, enforcement proceedings can only be initiated on the basis of:
final and/or enforceable judgments (orders of payment);
court settlements; or
enforceable arbitral awards.
This requires the initiation of court or arbitral proceedings which are often lengthy and expensive. However, in specified cases the litigation process can be expedited by a fast track, simplified court procedure. Such cases include:
petty claims;
claims acknowledged by a debtor; or
claims resulting from promissory notes.
Voluntary submission to execution. Both secured and unsecured creditors can, in certain cases, request that the debtor execute a voluntary submission to execution (that is, a document in which the debtor agrees to future enforcement proceedings in relation to specified claims). The debtor can submit itself to execution under either the:
Code of Civil Procedure (in the form of a notarial deed); or
Banking Law of 29 August 1997, with respect to claims arising from transactions with banks (in simple written form).
If the satisfaction of a creditor's claim is threatened, a creditor can seek injunctive relief from the court (for example, to allow an attachment of selected assets or prevent a debtor from transferring or encumbering its assets). Usually, injunctive relief is obtained immediately before or during the relevant court (or arbitration) proceedings.
Set-off of mutual debts on insolvency is available but not mandatory. A creditor intending to exercise its right of set-off must make a relevant declaration at the latest at the time of filing a claim in the proceedings (late declarations are ineffective).
In liquidation proceedings (see Question 6, Bankruptcy), set-off of the bankrupt's claim against the creditor's claim is admissible if both claims existed on the date bankruptcy was declared, even if one of them was not yet due. However, in certain situations set-off is excluded if, for example:
A debtor of the insolvent company acquired a claim it wants to set-off against the insolvent company through an assignment after a bankruptcy declaration (or, knowing that the company is insolvent, in the 12 months preceding the bankruptcy declaration).
A creditor became a debtor of a bankrupt company after bankruptcy was declared.
In composition bankruptcy (see Question 6, Bankruptcy) the set-off of mutual claims between the bankrupt and a creditor is generally admissible, but may be excluded in certain cases, such as if the creditor became a debtor to the bankrupt after the declaration of bankruptcy.
State support for distressed companies may be available subject to EU law regulating state aid.
In addition, state aid may be granted to large companies by the Industrial Development Agency (IDA). The IDA can either:
Grant aid to restore a company's liquidity, in the form of loans or guarantees granted for up to six months.
Aid restructuring, in the form of loans, guarantees or acquisition of shares in increased capital.
Tax authorities, at a company's request, can also grant tax relief (relating to tax arrears or default interest), if this can be justified in the important interests of taxpayers or in the public interest.
If certain conditions are met, the debtor can also apply for deferral of social insurance contributions due to financial difficulties.
Objective. In bankruptcy proceedings, creditors' claims can be enforced in two ways:
Liquidation. The objective of liquidation is to wind up the debtor's business and distribute the proceeds from the sale of its assets to the creditors.
Composition. The objective of composition is to enable a debtor in financial difficulties to reach a binding debt restructuring plan (composition) with its creditors. This is to avoid liquidation and provide the creditors with a better chance of recovering the debtor's assets than through winding up the business. Composition must be chosen if it is likely to achieve a better realisation of the debtor's assets than liquidation, unless the debtor's conduct indicates that the composition will not be implemented.
Initiation. Bankruptcy proceedings are initiated by a petition to a court, which can be submitted by the debtor or any of its creditors. The debtor must submit the petition within two weeks of insolvency. There is no time limit for creditors to apply for a debtor's bankruptcy.
A bankruptcy declaration from the court is required to initiate bankruptcy proceedings (liquidation or composition). No other consents are required to initiate proceedings. If either of the substantive tests are met, the court will declare the debtor bankrupt and commence bankruptcy proceedings (see below, Substantive tests).
When declaring bankruptcy, the court usually chooses whether the proceedings will be liquidation or composition. However, the type of proceedings can also be decided by the creditors in a preliminary creditors' meeting (if convened) or may be changed during the proceedings (for example, composition must be changed to liquidation if the creditors fail to adopt a composition).
Substantive tests. The court will declare the debtor bankrupt and commence bankruptcy proceedings if either of the following tests is satisfied (Bankruptcy and Restructuring Law, 28 February 2003) (Bankruptcy Law):
Liquidity test. The debtor has stopped performing its due monetary obligations.
Balance sheet test. The debtor's estate is insufficient to satisfy its obligations, even if the obligations are still being paid.
However, the court must dismiss the bankruptcy petition if there are insufficient assets in the estate to cover the costs of the proceedings (unless setting aside some of the debtor's actions is likely to result in sufficient assets). The court may also dismiss the petition if the:
Bankruptcy estate (excluding assets secured by pledges, mortgages or similar security interests) does not cover the costs of proceedings, unless setting aside some of the debtor's actions is likely to result in there being sufficient assets.
Debt has been unpaid for no more than three months and the debt is less than 10% of the balance sheet value of the debtor's business.
Supervision and control. After bankruptcy is declared by the court, proceedings are conducted by the bankruptcy judge (judge-commissioner). The bankruptcy judge supervises the insolvency practitioners (that is, the receiver, administrator or court supervisor). In specific cases, decisions are made by the bankruptcy judge during proceedings (for example, a decision to dismiss the insolvency practitioner).
Certain decisions or transactions by the insolvency practitioner must be approved by the creditors committee (or if none, the bankruptcy judge). They include:
Loan agreements.
Granting security.
In a liquidation, a piecemeal sale of assets or private sale of a business instead of a sale by public auction or tender.
In liquidation, a bankruptcy receiver exclusively represents and manages the bankruptcy estate. If liquidation is declared, debtor-in-possession management is not possible.
In composition, the debtor's business is continued. The business is managed by either:
The debtor's management board overseen by a court supervisor (debtor-in-possession is the default option).
A bankruptcy administrator.
In both cases, the actions of the management board are fairly restricted in relation to the administration and disposition of assets of the bankruptcy estate.
Protection from creditors. In liquidation, the company gains protection from creditors, for example:
Creditors (including secured creditors and tax authorities) generally can only assert or enforce their rights by submitting their claims in the bankruptcy proceedings (except for creditors secured by a registered pledge, who in certain circumstances can acquire the pledged asset).
Court proceedings for claims against the debtor to be satisfied from the bankruptcy estate are stayed on declaration of bankruptcy and can be recommenced against the receiver.
Enforcement proceedings are stayed on declaration of bankruptcy, and terminated when the declaration of bankruptcy becomes final.
No new enforcement proceedings for monetary claims, or proceedings where creditors seek payment of claims arising before bankruptcy, can be commenced against the debtor during the bankruptcy proceedings.
In a composition, the company also gains certain protections, for example:
Any claims covered by the composition proceedings cannot be paid or enforced (this does not include claims secured on the debtor's assets, for example relating to mortgages and pledges).
The bankruptcy judge can, on an application filed by the debtor or the bankruptcy administrator, lift court attachment orders made to secure or enforce a claim covered by the composition, if it is necessary to continue the business.
During the proceedings, a party to a contract with the insolvent company cannot terminate certain contracts (such as a lease of premises where the insolvent company runs its business) without the consent of the creditors' committee (or the bankruptcy judge). The terms of the composition may also provide that these contracts cannot be terminated until the composition is performed.
Length of procedure. The court should in theory declare bankruptcy within two months of the debtor or any creditor submitting the bankruptcy petition. However, this deadline is frequently not met. Bankruptcy proceedings can vary from several months to several years.
Conclusion. Liquidation proceedings are formally concluded by a court decision declaring the proceedings complete. This decision is made following the final distribution to creditors after the full liquidation of the bankrupt company's assets, or after full satisfaction of all creditors.
Composition proceedings are also formally concluded by a court decision declaring the proceedings completed. The decision is issued after the court approval of the composition becomes final. However, the court may subsequently set the composition aside if the company does not implement it. If this occurs, liquidation proceedings are then commenced automatically.
The court may also discontinue bankruptcy proceedings (for example, if all the creditors demand discontinuation).
Objective. Restructuring is used to protect a company expecting financial difficulties and reduce its risk of bankruptcy.
Initiation. Restructuring can be initiated by any business entity (including a company and sole trader) threatened with insolvency. To prevent restructuring from being used to the detriment of creditors, debtors who were subject to bankruptcy or used restructuring in the past can only apply for restructuring subject to certain limitations.
There is no obligation to initiate restructuring. The debtor must apply to a court to start restructuring and submit the following required documents to that court:
A declaration to initiate restructuring.
Exhibits showing the financial standing of the debtor (for example, financial statements, list and evaluation of assets and list of creditors).
A detailed rescue plan (including a proposed composition with its creditors).
If the court does not prohibit the initiation of restructuring within 14 days of submission of the above documents, the restructuring will commence when the debtor's declaration is published in the appropriate official journal. The debtor requires no specific consents or approvals to initiate these proceedings.
In exceptional cases, the debtor may be allowed to open restructuring after it has become insolvent. This option is available if both:
A bankruptcy petition was dismissed by the court because the debt owed to the creditor was both:
outstanding for no more than three months; and
less than 10% of the balance sheet value of the debtor's business.
When dismissing the bankruptcy petition, the court allowed the debtor to open restructuring.
Substantive tests. The debtor must show that it is at risk of insolvency (that is, it is obvious in light of a reasonable assessment that the company will satisfy one of the two substantive bankruptcy tests in the near future (see above, Bankruptcy: Substantive tests)).
Supervision and control. After opening restructuring, the court appoints a court supervisor. The debtor's business continues, and is managed by the debtor and overseen by the court supervisor.
Protection from creditors. On the date restructuring is opened:
The payment of any existing claims covered by the composition (particularly unsecured claims) and the accrual of interest due from the debtor are suspended.
No enforcement proceedings or proceedings to attach assets covered by the composition can be opened against the debtor, and any such existing proceedings are stayed.
On application by the debtor, the court can amend any interim measures to secure monetary claims, in particular by revoking any orders authorising the seizure of assets by creditors.
Length of procedure. As the deadlines are short, compositions are adopted shortly before the end of the restructuring proceedings. If no composition is reached with the creditors, restructuring proceedings are automatically terminated after either:
Three months, in the case of small and medium-sized businesses.
Four months, in the case of all other businesses.
Conclusion. Restructuring is concluded if the creditors adopt a composition. To be binding, the composition must be approved by the court. Proceedings are automatically terminated if no composition with creditors is reached (see above, Length of procedure). If a composition is not concluded, the debtor may have to file for bankruptcy (depending on the circumstances).
Liquidation. The receiver has the most significant role as he is responsible for winding up the business. Creditors may have a limited influence over the receiver's decisions but this can only be exercised through a creditors' committee (which is not usually formed, so its powers are exercised by the bankruptcy judge). In particular, the creditors' committee (or the bankruptcy judge) must approve certain transactions.
Composition. The creditors decide whether a composition should be adopted. The shareholders' role in adopting the composition is limited, because a claim by a parent company shareholder does not allow it to vote on the composition. However, shareholders can increase the chances of the composition being adopted by either:
Committing to re-capitalise the company.
Offering creditors additional security.
Guaranteeing performance of the composition.
Restructuring. The role of various stakeholders is essentially the same as for composition (see above) but with one important exemption: the success of restructuring largely depends on the debtor and whether it can convince the creditors to adopt composition within the short legal deadlines.
Generally, any third party, including a parent company or a director, can be liable for the company's debts, if:
It grants security (for example, gives a guarantee to a creditor).
Debt is assigned to it through a contractual assignment or accession to a debt.
Moreover, subject to certain limitations, the buyer of the whole or part of an insolvent business is jointly and severally liable with the seller for any debts relating to the business which arose before the acquisition.
Depending on the debtor's legal form and the exact basis of liability, members of a company's management board or other persons (such as general partners) may be required to pay some of the company's debts in certain circumstances (for example, if a bankruptcy petition is not filed within two weeks of insolvency). The debts may include:
Tax arrears.
Social security payments.
Civil law claims of private creditors.
The following transactions by a debtor before bankruptcy are set aside automatically by operation of law (no decision of the bankruptcy judge is required):
Gratuitous transactions or transactions at a substantial undervalue, within one year before the bankruptcy petition is filed.
Security granted for or payment of an obligation not yet due (with minor exceptions), within two months before the bankruptcy petition is filed.
Transactions against payment (that is, based on each party receiving economic consideration, such as sale or lease agreements) with certain affiliated entities, in the six months before the bankruptcy petition is filed. The affiliated entities include the debtor's shareholders, management board members, affiliated companies and/or their shareholders, a dominant company and a subsidiary,
The following transactions by a debtor before bankruptcy may be set aside by a bankruptcy judge:
Part of the remuneration paid to a debtor's directors, if grossly disproportionate to normal market conditions and not justified by their workload.
Security for the benefit of parties other than the bankrupt company's creditors, created within one year before the filing date of the bankruptcy petition, if:
the bankrupt company was not paid for this or was paid at an undervalue; or
the collateral secures debts of certain affiliated entities (see above).
The insolvency practitioner can challenge or request the court to set aside a debtor's transaction based on general civil law if the transaction is made to the detriment of its creditors (actio pauliana). Such transactions generally require the following elements:
Detriment to creditors.
The debtor being aware that it is acting to the detriment of its creditors.
Transfer of a material benefit to a third party.
The third party being aware that the debtor consciously acted to the detriment of its creditors (certain presumptions easing the burden of proof are available).
If a transaction is set aside, the insolvency practitioner can demand the return of any assets that were transferred from the bankruptcy estate (or not transferred to the estate). If it is not possible to return the asset(s), a monetary equivalent must be provided.
The insolvency practitioner can also claim an asset(s) back from a third party, if the third party acquired the asset from a party to a transaction that may be or has been set aside. The insolvency practitioner must prove that the third party knew of the grounds on which the transaction was set aside.
The company's business can be continued during both composition bankruptcy and restructuring proceedings.
In a liquidation, the receiver decides whether and to what extent the debtor company's business should be continued. In making this decision, the receiver should take into account the creditors' interests. The business may be continued if it is reasonable to do so, in light of the general aim of bankruptcy to satisfy the creditors' claims as far as possible.
Bankruptcy proceedings. The following procedures apply:
Liquidation. The receiver conducts the company's business under the general supervision of the bankruptcy judge and/or the creditors' committee. If the business is to be continued for more than three months after the declaration of bankruptcy, consent is required from the creditors' committee (or if none, a bankruptcy judge).
Composition. There are two options:
Self-administration (debtor-in-possession). The debtor runs the business under the supervision of a court supervisor, and must obtain the supervisor's consent for all transactions outside the scope of its ordinary business. Failure to obtain consent makes the transaction invalid;
Administrator. A court-appointed administrator manages the business under the general supervision of the bankruptcy judge and/or the creditors' committee. An administrator is appointed if the court doubts whether the debtor will administer the assets properly.
The court can revoke self-administration and appoint an administrator if either:
While managing the business, the debtor violates the law (even unintentionally).
The debtor's management of the business does not guarantee performance of the composition.
Restructuring proceedings. The debtor continues to carry on the business. However, the debtor must obtain the consent of the court-appointed supervisor for all transactions outside the ordinary scope of its business, such as the purchase of the immovable property, termination of key contracts and so on. Failure to obtain consent makes the transactions invalid. In addition, until a composition with its creditors is concluded (see Question 6, Restructuring: Conclusion) a debtor cannot use its assets as security or sell them (unless these assets are typically sold in its day-to-day business).
In composition bankruptcy, intellectual property (IP) licences granted to a debtor cannot be terminated without the consent of the creditors' committee (or if none, a bankruptcy judge). The composition with creditors may prohibit the termination of an IP licence for the duration of its performance.
During bankruptcy proceedings the debtor can obtain additional financing, such as loans, with the consent of the creditors' committee (or if none, a bankruptcy judge). In a liquidation, any claim for repayment of financing provided after the bankruptcy declaration is satisfied in category one (see Question 2).
Foreign insolvency proceedings may be recognised under:
Regulation (EC) 1346/2000 on insolvency proceedings (Insolvency Regulation).
Provisions of the Bankruptcy Law which implement the UNCITRAL Model Law on Cross-Border Insolvency 1997 (UNCITRAL Model Insolvency Law).
Under the Bankruptcy Law, recognition of foreign insolvency proceedings is not automatic. An application must be made to a Polish court for an order recognising the foreign proceedings.
Following recognition, the effects of the foreign insolvency proceedings are extended to Poland. In particular:
Any person who, in the foreign proceedings, performs functions equal to those of a receiver, administrator or court supervisor under Polish law (foreign representative), can perform the same functions in Poland.
Litigation and enforcement proceedings relating to a debtor's assets are stayed.
The debtor loses the right to manage its assets (unless proceedings leading to a composition with creditors with a debtor-in-possession option were initiated) and the foreign representative takes over its management and liquidation.
Polish courts may open secondary proceedings under the Insolvency Regulation and (to the extent that the Insolvency Regulation does not apply) the Bankruptcy Law.
If there are pending foreign main bankruptcy proceedings, a Polish court has jurisdiction to open secondary bankruptcy proceedings, provided that the debtor runs a business, has assets, and is domiciled or has a registered office in Poland (Bankruptcy Law). The court may open secondary proceedings either:
On application of a creditor with a registered office in or which is domiciled in Poland.
At its own initiative, if it is necessary to protect certain categories of creditors (such as employees).
The secondary proceedings can be either a liquidation or composition bankruptcy (Bankruptcy Law).
The Insolvency Regulation applies in Poland, as an EU member state. Poland has also implemented the UNCITRAL Model Insolvency Law (see above, Recognition).
No special procedures apply to foreign creditors.
In bankruptcy proceedings, foreign creditors have the same rights as Polish creditors. However, foreign taxes, other public dues, social security levies or non-civil law penalties cannot be paid in bankruptcy proceedings conducted in Poland (Bankruptcy Law).
The latest set of extensive amendments to the Bankruptcy Law came into force in May 2009. Numerous stakeholders considered these changes to be insufficient and in need of adjustment. For example, the changes were criticised for having:
Rigid insolvency tests.
Insufficient tools for creditors to exercise influence over proceedings and the choice of insolvency practitioner.
Inoperative provisions for opening restructuring proceedings.
The Ministry of Justice has started work on more extensive reform of the Bankruptcy Law. The planned amendments, although drafted, have not yet been disclosed to the public.
T +48 22 24 25 669
F +48 22 24 25 242
E APukszto@salans.com
W www.salans.com
Qualified. Poland, 2002
Areas of practice. Reorganisation; restructuring and insolvency; arbitration; litigation.
Recent transactions
T +48 22 24 25 736
F +48 22 24 25 242
E KMorawska@salans.com
W www.salans.com
Areas of practice. Reorganisation; restructuring and insolvency; litigation.
Recent transactions
