What is Concordat?
Concordat is a legal process that individuals or companies struggling to pay their debts apply for in order to restructure their debts and avoid bankruptcy.
Purpose
- Debt restructuring
- Prevention of bankruptcy
- Continuation of business operations
Who Can Apply?
Both companies and individuals can apply for concordat.
Court
The application is made to the commercial court of first instance at the location of the company’s headquarters or the debtor’s place of residence.
Advantages
- Companies have the opportunity to continue their operations.
- Creditors can collect at least part of their receivables.
Documents Required for Concordat Application
The company applying for concordat must submit documents to the court that comprehensively present its financial situation:
- Concordat Preliminary Project: Includes payment plan, asset analysis, and financing sources.
- Financial Statements: Balance sheet, income statement, books, and lists of receivables and payables.
- List of Creditors: Identity, address, and receivable amounts of creditors.
- Comparative Table: Comparison of the concordat plan with the bankruptcy scenario.
- Independent Audit Report: Independent opinion on the feasibility of the plan.
Temporary Respite
Temporary respite is the initial stage of the concordat process. During this period, the company’s assets are protected and the plan is prepared.
- Purpose: Protection of assets and preparation of the concordat plan.
- Duration: 3 months (may be extended by 2 months by court decision).
- Commissioner: Appointed by the court, supervises the process and prepares reports.
- Result: After announcement, creditors may object.
Definitive Respite
Definitive respite is the most critical stage of the concordat process, where the restructuring plan is implemented.
- Start: Begins with the court’s approval of the plan.
- Duration: Usually 1 year (may be extended by 6 months if necessary).
- Actors: Commissioner and creditors’ committee.
- Purpose: To structure and repay debts in an orderly manner.
Effects of Definitive Respite on the Parties
Effects on Creditors
- No enforcement proceedings can be initiated.
- No seizure or interim measures can be applied.
- Statute of limitations periods are suspended.
- Set-off transactions are restricted.
- Transactions on seized assets are restricted.
Effects on Contracts
- Essential contracts for the business continue.
- Contracts cannot be terminated due to concordat.
- Excessively burdensome contracts may be terminated with court permission.
Effects on the Debtor
- Operations continue under the supervision of the commissioner.
- Court permission is required for certain transactions.
- Restrictions apply to the debtor’s assets.
- Failure to comply with rules may result in termination of the process.
Role of Creditors in the Concordat Process
- Notification: Creditors must declare their receivables within the period determined by the commissioner.
- Evaluation: Verified by the commissioner.
- Meeting: They may attend concordat meetings.
- Voting: Affected creditors may vote.
Acceptance of the Concordat Project
- A certain majority must be achieved.
- Votes of privileged creditors are considered with limitations.
- Contested receivables are decided by the court.
Approval and Conclusion of Concordat
The concordat process concludes with the court’s approval decision.
Court Evaluation
- The commissioner’s report and case file are reviewed.
- Objections are evaluated if necessary.
Conditions for Approval
- Approval by the majority of creditors
- The proposal being more advantageous than bankruptcy
- Proportionality to the debtor’s resources
- Protection of privileged receivables
- Payment of litigation costs
Content of the Approval Decision
- The amount waived by creditors
- Payment plan and schedule
- Appointment of a trustee if necessary
