Tougher rules for demanding a debtor’s insolvency

This is one of the top changes made to the insolvency proceeding legislation, as the number of application for a debtor’s insolvency boomed recently. However, lawyers say that asking for a debtor’s insolvency rarely leads to the desired outcome, namely recovering the debt.

The number of insolvency proceeding demands rose some 70 percent year-on-year in the first six months of 2009, to 12,490 demands countrywide, according to data made available by the National Trade Register Office.

“Insolvency is mainly used as a tool of pressure. In our view, companies should only demand insolvency proceedings if foreclosure is not successful,” according to Lawyer Robert Roşu, coordinator of insolvency proceedings within Ţuca, Zbîrcea&Asociaţii law firm. Based on the previous legislation, a company could have filed for a debtor’s insolvency for a debt that was not paid 30 days after it was due. Furthermore, debt must be “certain, liquid, and exigible.” Plus, those who file for insolvency must pay a fee worth RON 120 (€28) instead of RON 39 (€9).

“The border between legitimately launching such proceedings and starting it abusively is very thin,” according to Cosma şi Asociaţii law firm Managing Partner, Romeo Cosma, said. Another insolvency lawyer, Ana Birchall, said that one of the most important changes in the legislation is the fact that banks will be compelled from now on to keep financing companies undergoing insolvency trials. She added that special court houses should be established for this segment.

Several major companies were subject to insolvency proceedings lately, as some of their suppliers, generally small or medium-sized companies, sued them. Last year, Metro Romania was close to foreclosure due to an arrear debt. Several months ago telecom operator RCS&RDS, one of the top players on the cable and digital TV and internet segments, was sued for a debt.

One of the latest cases was filed by railway transportation Classfer SRL company against Lafarge Ciment, the second-largest construction material producer locally, for debts totaling €350,000. Lafarge Ciment posted some €370 million worth of business last year.

“We sued them because they did not comply with their contract obligations. Lafarge did not pay any money to Classfer since 2007 and now their debts are close to RON 1.5 million (€350,000). We kept sending notifications, but they ignored us,” the owner of Antares group, which controls Classfer, Dumitru Becşenescu, told Business Standard. The money come from three contracts signed by the two companies in 2003, for 6-7 years. This year, Lafarge canceled the contracts due to the financial crisis and faulty services provided by Classfer. The French company said that the transport operator’s demand “has no grounds” and that they will ask the court to fine Classfer for launching groundless proceedings in justice.