Arrangement with creditors in Romania

Useful restructuring mechanism for entrepreneurs and their creditors

The  preventive concordat (preventive composition) in Romania is the judicial procedure for preventing insolvency regulated by Law no. 85/2014 on preventing insolvency and insolvency proceedings, whose opening suspends enforcement proceedings under the law, while the debtor can restructure its business in Romania and pay all or part of the affected claims based on a restructuring plan voted by the creditors whose claims are affected and approved by the insolvency judge. The Romanian Law Firm Pavel Mărgărit and Associates provides legal assistance in the preventive restructuring proceedings procedure, including representation before the insolvency judge, as well as in relations with creditors to obtain favourable votes. Our team of lawyers specialized in restructuring and insolvency fields supports both companies facing financial difficulties and creditors interested in protecting their interests within this procedure.

Insolvency lawyer in Romania. Who can benefit from the concordat in Romania?

Any enterprise facing difficulties but not yet insolvent. Difficulty represents a temporary state caused by any circumstance that generates a real and serious threat to the debtor’s future capacity to pay debts at maturity if no adequate measures are taken. The debtor in difficulty is able to fulfil obligations as they become due. An insolvency lawyer in Romania and a litigation lawyer in Romania can provide essential assistance in identifying the appropriate legal solutions to restructure the business, avoid opening of insolvency proceedings in Romania and protect company assets. They analyse the financial situation in detail, propose efficient restructuring measures and reorganization in Romania, and prepare the necessary documentation to initiate the preventive concordat proceeding in Romania.

Litigation lawyer in Romania. Advantages of the preventive in Romania over insolvency procedure in Romania

The preventive concordat proceeding allows the entrepreneurs to maintain control over the business and propose a restructuring plan adapted to their needs, avoiding the rigid solutions typical of insolvency procedure in Romania. This procedure is viewed more favourably, helping preserve reputation with clients and partners. There is flexibility in negotiating debts and the possibility of obtaining better conditions than in insolvency. Costs are generally lower, and the company can become more attractive to investors. The debtor chooses the concordat administrator, benefits from automatic suspension of enforcement and penalties, and creditors cannot request insolvency or change essential contracts to the debtor’s detriment. Interim financing is possible, and the entrepreneur can negotiate individually or collectively with creditors, choosing which claims are affected by the restructuring. The plan is voted only by creditors whose claims are affected.

Insolvency lawyer in Romania. Benefits for creditors of the entrepreneur related to the preventive concordat proceeding.

Creditors benefit from multiple guarantees and rights during the preventive concordat, including the ability to initiate the proceeding, vote by correspondence and recover claims more efficiently, especially creditors without preferential rights. Contractual relationships are not definitively affected; interest and penalties are temporarily suspended. The administrator’s fee is covered by the debtor’s funds, not the creditors’. The approved restructuring plan does not affect unaffected creditors, who retain the right to initiate enforcement proceedings if debts remain unpaid. Affected creditors receive quarterly reports from the judicial administrator in Romania. Creditors providing new or interim financing are protected from civil, administrative, or criminal liability solely for their involvement. Creditors exercise their rights collectively by voting at creditor meetings.

“The preventive concordat proceeding represents a balanced solution for companies in difficulty, offering a real chance to recover without losing control over the business. It is an effective alternative to insolvency proceedings in Romania for both debtors and creditors,” said Senior Associate Lawyer Dr. Nicoleta Mirela Năstasie from The Romanian Law Firm Pavel, Mărgărit and Associates.

“Through the preventive concordat  in Romania, companies can preserve their reputation and negotiate viable restructuring terms directly, while creditors benefit from transparency and predictability in debt recovery,” said Dr. Radu Pavel, Managing Partner of The Romanian Law Firm Pavel, Mărgărit and Associates.

In conclusion, the preventive concordat proceeding in Romania is a valuable opportunity for enterprises in difficulty, allowing them to avoid insolvency proceedings in Romania and continue operations under regulated and controlled conditions. This legal solution preserves the entrepreneur’s control, protects the business’s reputation, and encourages direct, transparent negotiations with creditors within a secure legal framework. With the support of an insolvency lawyer in Romania and a litigation lawyer in Romania, companies can access this mechanism efficiently, ensuring financial recovery, long-term stability and avoiding insolvency procedures in Romania.

Pavel, Margarit and Associates Law Firm is one of the top law firms in Romania, providing high-quality legal services. The firm’s clients include multinational and domestic companies of great magnitude. In 2024, the law firm’s success stories brought it international recognition from the most prestigious international guides and publications in the field. As a result, Pavel, Margarit and Associates Law Firm ranked 3rd in Romania in the Legal 500’s ranking of business law firms with the most relevant expertise. The law firm is internationally recognized by the IFLR 1000 Financial and Corporate 2024 guide. Additionally, Pavel, Margarit and Associates Law Firm is the only law firm in Romania recommended by the international director of Global Law Experts in London in the Dispute Resolution practice area. All relevant information about Pavel, Margarit and Associates Law Firm can be found on the website www.avocatpavel.com.