The 2007 Bankruptcy Code aims at introducing a modem legislation, influenced by and adapted to the social and economic reality of our time, armed with simplicity and substance in a way to be understood by the citizens, oriented to the social needs of bankruptcy, namely economic logic and social peace, which are the goals of all modem legislations.
The Code’s objectives, i.e. maximization of value assets of the debtor, a balanced system between liquidation and reorganization, equal treatment of creditors of similar legal state and a quick and efficient proceeding respecting the rights of all participants have been based on two pillars: the first one is a ‘single system› of liquidation and reorganization, both of which fall under the institution of bankruptcy, thus replacing the preexisting dual system.
Bankruptcy, even as a method of enforcement, was and remains an institution of commercial law, not of the law of procedure. Some main features of the new Bankruptcy Code have as follows:
The survival of the debtors’business isbasically safeguarded by two voluntaryrestructuring proceedings. The-first is the prebankruptcy restructuring rehabilitation proceedings, a pre-bankruptcy process which applies to debtors in cessation of their payments. The second is the reorganization plan, a process which presupposes the initiation of bankruptcy proceedings but which can start ‹simultaneously with bankruptcy proceedings on the application of the debtor or afterwards of the trustee [σύνδικος, syndicos). The legitimacy of both is guaranteed by the court.
-A fresh-start chance is given to the debtor by the separation of his assets into those prior to the initiation of the bankruptcy proceedings under the trustee’s management and those acquired afterwards by the debtor which remain under his free administration. A discharge of the debtor from the unsatisfied part of the creditors claims is also provided.
-The Code, influenced by the new social environment, has abolished all kinds of privations and sanctions imposed by the old law on the person of the debtor. It has also abolished the traditional extension of bankruptcy consequences on the property of the other spouse provided by the preexisting law as incompatible with the institutions of family and marriage; it maintains the super privilege of the employees; it uses the term‘debtor’instead of the term ‘bankrupt’because of its negative content.
-Debtors eligible to bankruptcy proceedings arc merchants (natural persons or commercial companies) or groups of persons with legal personality aiming at an economic goal. -In order to put an end to the ever-going-on bankruptcies, the Code provides a time limit for all bankruptcies of maximum duration of 15 years from commencement of the bankruptcy proceedings.
-The organization of the bankruptcy is based on five ‘bankruptcy organs’: the bankruptcy court which is always the ‹three-member first instance court, as the principal organ; the judiciary reporter, a judge with extended responsibilities and competencies; the syndicos (trustee) to whom the administration of the debtor’s assets is entrusted; the creditors’ meeting which takes the crucial resolutions on the development of the bankruptcy and the creditors’ committee, as a facultative organ to cooperate with the syndicos.
-Special provisions refer to the: liability of representatives of legal persons, mostly of corporations, and the liability of the syndicos and the members of the creditors’ committee; to a simplified bankruptcy proceeding of a value less than EUR 100,000; to the crimes of fraudulent bankruptcy and privileged treatment of a creditor; to the sale of business as a whole and its favorable tax treatment and the post-financing treatment in the form of a priority right.
-The Code has also adapted to the provisions of Regulation 1346/2000 EC on insolvency proceedings. Greece according to the Law 3858/2010 has adapted to the UNCITRAL Legislative Guide on Insolvency Law.
GENERAL OVERVIEW
Application and commencement
Bankruptcy presupposes three conditions: two substantial and one procedural.
a. The substantial conditions are: first, eligibility of the debtor as a merchant, or as a union of persons with legal personality engaged in economical activities; and second, the cessation of payments or the imminent insolvency (the prospective inability to pay).
b. The procedural condition is the declaration of bankruptcy by judgment of a court that has jurisdiction over the commencement (declaration) of bankruptcy proceedings. The competent court is the first instance court of the place where the debtor has its center of main interests. Bankruptcy proceedings may be initiated by a creditor’s application and by the district attorney in case of public interest.
c. The court’s judgment is immediately enforceable and it creates a new situation erga omnes. It may be reviewed by appeal and cassation, it is also subject to bankruptcy caveat and to a petition for revocation.
d. The court, on petition, may change the time of cassation of payments (suspect period). The court dismisses the petition to open bankruptcy proceedings because of insufficient assets by the debtor to fund the procedural costs or because of the abusive character of the petition.
Substantial bankruptcy law
Substantial bankruptcy issues are the effects of bankruptcy as regards the debtor and the creditors.
a. Effects as regards the debtor
As regards the debtor, bankruptcy has only the personal effects which are provided by special laws. Effects refer only to the debtor’s estate. In particular:
i. The fundamental effect as regards property is bankruptcy divestment.
ii. Bankruptcy divestment refers to the debtor’s estate. The time of constitution of the bankruptcy estate is the effective date of commencement of proceedings. The bankruptcy estate includes only assets on which divestment applies. Assets which cannot be subject to seizure because of their nature are excluded from the bankruptcy estate. The Code does not extend the effect of divestment to the post-commencement estate of the debtor natural person, which the debtor may freely dispose and manage.
iii. The bankruptcy estate may increase or decrease due to some important institutions of
bankruptcy law such as: -Avoidance proceedings, bankruptcy separation and vindication and treatment of contracts.
b. Effects as regards the creditors Creditors in bankruptcy proceedings may appear in three types:
i. Bankruptcy creditors’who have an accrued monetary claim against the debtor at the commencement of proceedings; ‘post-commencement creditors’ who have a claim against the debtor arising out of his post-commencement acquired estate; and ‘mass-creditors’, whose claim against the debtor’s estate derives from its administration by the syndicos.
ii. Bankruptcy creditors are distinguished in four categories (art. 21): -‘Unsecured creditors’ (their claim to be satisfied by the debtor’s estate is not secured by a priority or real security);
-‘Priority creditors’ (their claim has a general privilege for satisfaction from the whole of the debtor’s estate);
-‘Secured creditors’ (their claim is secured by special privilege or real security on a specific asset of the debtor’s estate); and -‘Creditors of reduced protection’(their claim will be satisfied from the debtor›s estate after the satisfaction of the unsecured creditors).
Bankruptcy as a procedure
The bankruptcy procedure is divided in two stages: (a) preparatory proceedings and (b) final proceedings.
a. Preparatory proceedings
Preparatory proceedings include the conditions to forward the proceedings and the submission-verification and admission of claims.
The evolution of the bankruptcy procedure is connected with bankruptcy organization and the existence of assets to cover the bankruptcy costs.
i. The Code organizes bankruptcy proceedings by providing suitable organs (art. 52-88). These are:‘the bankruptcy court’of the opening of the proceedings which has the supreme supervision over bankruptcy and has jurisdiction in all trials in relation thereto; the‘juge rapporteur’ who has the overall supervision of bankruptcy and the oversight of the syndicos; ‘the syndicos’ (bankruptcy representative) who administers and represents the debtor’s estate, verifies and admits, in principle, the claims of the bankruptcy creditors; ‘the creditors’ meeting’ which takes decisions on crucial matters for the continuation of the bankruptcy proceedings; and ‘the creditors’ committee’ designed to facilitate active creditor participation and to assist the syndicos.
ΙΙ. The preparatory stage includes: first, acts which safeguard and preserve the assets of the debtor’s estate, such as sealing (art. 11), unsealing (art. 68, para. 1) of the debtor’s estate and completion of the relevant inventory (art. 68, paras 2, 3) of the estate’s assets and their delivery to the syndicos. Second, the management of proceedings, namely the submission of creditor claims and the verification and admission thereof (arts 89-95). In case of bankruptcy proceedings of a small amount value of the bankruptcy estate (less than EUR 100,000) the Code provides for a simplified method to resolve disputes arising out of the verification procedure (arts 162-163).
b. Final proceedings
Final proceedings aim at the satisfaction of creditors whether by liquidation and distribution or by reorganization.
i. The Code considers as an adequate means for creditor satisfaction the rescue of the business and its realization through a reorganization plan submitted to the bankruptcy court by the debtor and subsidiarily by the syndicos (arts 107 et seq). The court may accept or reject the plan. The purpose of reorganization is to maximize the possible eventual return to creditors, providing a better result than if the debtor were to be liquidated and to preserve viable business as a means of preserving jobs for employees.
ii. Where the court rejects the plan or where a reorganization plan after having been accepted by the court is later nullified, creditors are satisfied through the liquidation of the assets and distribution, i.e. through the so-called procedure of creditor union (arts 132 et seq.). The syndicos renders account to creditors and bankruptcy is terminated.
Conclusion of proceedings
a. Bankruptcy is terminated (art. 164) in case of ratification of the reorganization plan, sale of all the assets of the debtor’s estate, cessation of proceedings due to lack of assets to cover expenses or the lapse of time set in art. 166, para. 3 (ten years starting from commencement of the creditors union or fifteen years from the commencement of proceedings). In case of cessation of proceedings the court may declare the debtor as pardonable.
b. The debtor-natural person may be reinstated in case he paid off in full his creditors or in case of lapse of a ten-year period from the commencement of the proceedings (art. 168). Legal persons may be reinstated only because of satisfaction of the creditors. The court may discharge the debtot natural person from the unpaid part of the claim if he is found to be pardonable after the lapse of three (3) years from the commencement of the proceedings.
Prebankruptcy Rehabilitation Proceedings
The Code has initially introduced a new pre-bankruptcy proceeding to prevent bankruptcy for debtors who prove financial weakness, present or anticipated, but who are not in a conciliation-stay of cessation of payments (arts 99-106).
The main consequences of the court’s confirmation were the suspension of enforcement measures for satisfaction as long as the agreement lasts and the suspension of collective measures, such as bankruptcy proceedings, for six months.
Amendments by the Code have introduced at the place of conciliation the so called Prebankruptcy Proceeding of Rehabilitation (Restructuring, arts. 99 -106α). The scope of the amendments is parallel to the EU’s policy for a new approach to business failure and insolvency basically to ensure that viable enterprises in financial difficulties may be able to restructure at an early stage with the view to preventing their insolvency by giving honest bankrupt entrepreneurs a second chance.
Restructuring proceeding is a collective prebankruptcy proceeding based on an agreement of rehabilitation concluded before or after the initiation of restructuring proceedings by the debtor and a majority of creditors and administered by the court.
In order to rescue the company as a going concern a“pre-pack”is possible in the form of a sale of all or part of a insolvent company’s business, before the company enters into administration and the sale is structured in a way to minimize the impact of the formal insolvency process.
Another type of proceedings “special liquidation” is an expedited, public sale of the insolvent’s entity’s business, upon application of at least 20% of its creditors. The sale must be completed within twelve (12) months, otherwise the procedure may be converted into bankruptcy proceeding.
