Measures to support and accelerate restructuring procedures and transposition of the Directive on restructuring and insolvency - Amendments to the CIRE and related legislation
Law no. 9/2022, published in the Diário da República on 11 January 2022, comes into force today. It establishes measures to support and speed up the course of corporate restructuring procedures and repayment plans, transposes Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 (on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt), and amends the Insolvency and Corporate Recovery Code, the Commercial Companies Code, the Commercial Registration Code and related legislation.
This law aims primarily to transpose the Directive on restructuring and insolvency into Portuguese law, which is done by introducing amendments to the PER (Special Revitalisation Process).
At the same time, a set of amendments are foreseen to simplify the course of insolvency and recovery proceedings, with the aim of making the judicial system more efficient and resilient, in implementation of Component 18 of the Recovery and Resilience Plan ("Economic Justice and Business Environment"). The opportunity was also taken to clarify procedural and substantive aspects on which there was imprecision in the law or the need to intervene due to judgements already taken, including by the Constitutional Court.
We briefly highlight some of the main amendments to the PER and the insolvency proceedings:
- Obligation of the debtor (other than micro, small and medium-sized companies) to submit a proposal for the classification of creditors affected by the recovery plan into distinct classes;
- It is clarified that the order appointing the provisional judicial administrator will prevent any enforcement action against the company for the collection of debts, for a maximum period of 4 months (which may be extended for 1 month on a well-founded basis), excluding from this regime enforcement actions for collection of employees' outstanding claims;
- New regime of so-called "ipso facto clauses" (agreed termination clauses);
- The concept of "essential executory contracts" is extended to all contracts (public and private) of continuous performance that are necessary for the continuation of debtor's day-to-day business;
- Additional protection granted to the "financing acts" of the debtor, either in the course of the PER ("interim financing") or in the implementation of the approved plan ("new financing");
- The content of the recovery plan is detailed;
- New plan approval regime in case of classes formation, facilitating its confirmation and becoming binding upon dissenting voting classes ("cross-class cram-down");
- Provisional judicial administrator’s obligation to submit to court a reasoned opinion on whether the recovery plan has reasonable perspectives of preventing the insolvency of the company or ensuring its viability;
- New requirements for judge’s confirmation or rejection of the recovery plan, including a positive prognosis of the plan's ability to prevent the company's insolvency or to ensure its viability;
- Clarification of the exhaustive nature of subordinate claims’ list;
- It is redefined that claims held by persons especially related to the debtor are subordinated, provided that the special relationship existed already at the time of their constitution (and not their acquisition);
- Narrower view of de facto administrator’s concept;
- Definition of compensation claims arising from employment termination by the insolvency administrator after debtor's declaration of insolvency as claims on the insolvency (and not on the insolvent estate);
- Insolvency administrator’s task of drawing up a liquidation plan for the sale of insolvency estate assets;
- Mandatory interim distributions, if the case is not ready for final distribution;
- Changes to the conduct and to the assumptions and effects of culpable insolvency;
- Shortening the length of income assignment from 5 to 3 years, for all individuals, to get discharge from debts;
- Exceptional reduction of interest for tax debts’ late payment.
To access to the entire wording of Law no. 9/2022, of 11 January:
For more information on this subject, please contact:
Catarina Guedes de Carvalho