The reality of Polish entrepreneurs is such that financial troubles usually results in their company being liquidated. Many bankruptcies could be avoided if not for the faulty restructuring law. However, this law is about to change. Will it mean that the reorganization procedure will be used more often?
The new restructuring law, which has been worked on for the last 3 years in now almost ready. The bill will be passed any day, will land on the president’s desk and wait for his signature. A discussion in the “Meetings at Brukselska” series, held at the offices of Employers of Poland, focused on what the new regulation may change in Poland’s economic reality.
– We are in for revolutionary changes – says Monika Swaczyna of the Młodzi Reformują Polskę association. The approach to bankruptcy and reorganization law will be different. – In general, the objective is to create a situation where financial troubles do not have to spell the end of a company. Obviously, bankruptcy is a completely normal phenomenon which regulates the economy and protects other market actors. However, in Poland it is used excessively and with effects that can hardly be considered optimal – she adds.
Sadly the regulations currently in force are not conducive to choosing restructuring, rather than closing companies, In Europe, a reorganization procedure is the first step, in Poland bankruptcy is usually the default solution. What is important, the reorganization procedures which give creditors more chance of getting their money back are almost never used in our country. There were only 31 in 2011 and most of them end with bankruptcy anyway.
– The stigma on entrepreneurs who are considered unreliable because they have used restructuring procedures is another thing – Swaczyna points out, adding that the attitude towards this in other countries in different.
Another problem is the complicated nature of Polish procedures, as entrepreneurs are practically unable to fill out all the forms required in a reorganization procedure without a lawyer’s assistance.
All this is to change. Procedures will be simpler, quicker and cheaper and their main objective will be to save as many companies as possible. The beneficiaries will be not only the owners and their employees, but the creditors as well.
– The current law is called the bankruptcy and reorganization law, nut there are practically no reorganization procedures. Sadly, we all lose, so changes are necessary – says prof. Elżbieta Mączyńska of the Warsaw School of Economics, Chairwoman of the Polish Economic Society.
Maciej Gieromin of the Allerhand Institute, who worked on the new regulations in the Ministry of Justice, argues that the new act will facilitate reorganization procedures. There will be several paths for companies in financial trouble, starting with procedures in which the court will only be an approving instance for companies’ agreements with creditors, to situations where it will, as it does know, declare bankruptcy and divide the assets.
Another important change will be that the receiver will be more of a restructuring advisor and not in name only. A license will still be required, but it will be easier to get. The intention is to involve managers who get companies out of trouble into the process.
Participants in the debate are openly concerned that courts may cause some trouble in the implementation, mainly due to the lack of experience and economic knowledge among the judges. – They should support these procedures rather than hinder them. I am not sure that this will really be the case – admits Wojciech Reszka, whose company “Relacje” works in restructuring.
Everybody hopes that the new law works as intended, though it is clear that positive change will not happen overnight. In time, there should be fewer bankruptcies and if they do happen creditors should get more of their money back. Both the economy and the market would benefit from that. Entrepreneurs should be aware of the imminent changes and the opportunities they will create.
The debate was organized within the framework of the “Establishment of the Research and Analysis Center” project, Human Capital Operational Program, Sub-activity 5.5.2.