What are the most important challenges of the preventive concordat?

What are the main stages of the preventive concordat procedure?

A preventive concordat (judicial pre-insolvency arrangement) is an effective legal solution, providing a regulated framework for debt restructuring and the avoidance of insolvency proceedings in Romania. However, this restructuring proceeding in Romania is not without significant challenges. The preventive concordat in Romania is governed by Law 85/2006, and correctly completing each stage is essential for a successful restructuring in Romania.

One of the main obstacles is the lack of cooperation from creditors. Often, they are reluctant to accept the terms proposed by the entrepreneur, because they fear they will not fully recover their claims. Poor communication or a lack of transparency on the part of the debtor can lead to the rejection of the restructuring plan, thus seriously affecting the real chances of saving the company and inevitably triggering the opening of insolvency proceedings in Romania.

Another major challenge is preparing an unrealistic plan. An effective restructuring plan requires an objective and detailed evaluation of the company’s financial situation, along with well-founded measures for the reorganization of the company in Romania. If the plan is overly optimistic and does not reflect reality, it may lead to a failed preventive concordat, followed by full insolvency proceedings in Romania and the company becoming insolvent.

Avocat faillite. Insolvency petition in Romania: filing and opening

The process begins with the application for opening the pre-insolvency proceedings in Romania, submitted by the debtor to the Tribunal at the company’s registered office. The applicationmust be accompanied by a report drawn up by a judicial (concordat) administrator in Romania, who analyses the debtor’s state of difficulty.

It is crucial that the restructuring petition in Romania is complete and accurately reflects the company’s situation to avoid the risk of rejection. An experienced insolvency lawyer in Romania can ensure the file is properly prepared, minimizing the chance of premature dismissal.

Avocat specialise en faillite. Arrangement with creditors, plan approval, and post-confirmation monitoring

After the opening of pre-insolvency proceedings in Romania, the court grants the debtor a protection period during which enforcement actions are suspended, typically starting at 4 months and extendable up to 12 months. During this period, essential contracts remain in effect despite outstanding payments.

Within 60 days from the opening of pre-insolvency proceedings in Romania, the entrepreneur—exclusively with the support of a judicial administrator in Romania (“administrator concordatar”)—prepares the restructuring plan. It is important to emphasize that creditors cannot propose their own plans; this exclusive right belongs to the debtor.

Following the plan’s submission, a maximum 60-day negotiation and approval phase begins with the affected creditors. During this period, the plan may be modified through successive voting rounds. If necessary, the court may grant an extension of up to 30 days to complete negotiations and voting.

Only creditors whose claims are included in the plan are entitled to vote. If the plan is approved, the court prepares the official minutes and, within 3 days, a request is made for judicial confirmation. This request must include a valuation report of the company’s assets prepared by an authorized expert.

After judicial confirmation, the entrepreneur continues to operate the business according to the terms of the approved plan. The judicial administrator in Romania submits quarterly progress reports to the court and creditors, providing updates on the company’s performance and the plan’s implementation. These reports are also reviewed by the court on a quarterly basis.

Throughout this sensitive phase, a litigation lawyer in Romania can represent the interests of the company or creditors in case of disputes, ensuring legal protection and smooth procedural progress.

Avocat insolvabilite. Closing the procedure: success or failure

The preventive concordat proceedings in Romania terminate in one of two ways: successful plan completion, which results in the extinguishment of restructured debts, or failure of the plan. If the plan fails, creditors can resume enforcement, and the company risks full insolvency.

As part of the exit process, a creditors voluntary arrangement in Romania or voluntary agreement with creditors in Romania is confirmed—if successful—or unwound when the judicial decision is rendered.

“Success in restructuring depends on realistic measures and the active involvement of all parties. A preventive concordat is not just a legal formality—it is a strategic reconstruction process,” says Senior Attorney Dr. Nicoleta Mirela Năstasie, of The Romanian Law Firm Pavel Mărgărit and Associates.

“A well-founded plan, supported by an experienced judicial administrator in Romania, can be the difference between recovery and failure. Through a preventive concordat, the company remains functional, and creditors benefit from a creditors’ voluntary arrangement in Romania in a controlled and predictable environment,” states Dr. Radu Pavel, Managing Partner at The Romanian Law Firm Pavel Mărgărit and Associates.

The Romanian Law Firm Pavel Mărgărit and Associates offers full legal assistance in insolvency proceedings in Romania and reorganization of the company in Romania, providing counsel and representation before courts and regulatory authorities. Their services include preparing and defending an insolvency petition in Romania, advising during an opening of insolvency proceedings in Romania, guiding an arrangement with creditors in Romania, and closing the insolvency proceedings in Romania successfully.

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.