Many businesses currently face worsening finances, leading to threatened or actual insolvency. They open restructuring proceedings to restore liquidity and agree debt repayment with creditors. Creditors are often surprised by both the opening and restrictions such as the prohibition on commencing or continuing enforcement against the debtor’s assets. They generally view restructuring as an obstacle to quick recovery.
What are restructuring proceedings?
Polish law provides four types: arrangement approval, accelerated arrangement, arrangement and remedial proceedings[1]. The choice depends on the business’s condition and measures needed to restore liquidity. Sometimes an out-of-court restructuring body and creditor agreement suffice, through arrangement approval. Sometimes direct judicial supervision and complex measures require one of the other three forms. A key difference for creditors is that in accelerated arrangement, arrangement and remedial proceedings the judge-commissioner approves the list of claims, enabling an enforcement title in the form of an extract. Arrangement approval does not involve formal approval of the list and offers no such title.
What is an extract from the list of claims?
It identifies the debtor, creditor, amount and source of the claim. Inclusion allows participation and voting[2]. Subject to conditions, an extract can also be an enforcement title[3] which, after receiving an enforcement clause, permits recovery.
When does the extract become an enforcement title?
Two conditions apply[4]. First, the judge-commissioner must approve the list containing the claim. Second, restructuring must end finally through approval of the arrangement, refusal of approval or discontinuance, for example because no arrangement was concluded[5].
The extract then becomes an enforcement title. Where the arrangement was approved, it must be accompanied by an extract of the final approval order. Where approval was refused or proceedings discontinued, it operates only against the debtor. Following approval, it can also operate against (i) a security provider, if a document confirming security was filed with the court, and (ii) a creditor obliged to make supplementary payments where the arrangement provides for such payments between creditors.
What is its legal nature?
Scholarship and case law classify the extract under Article 777 § 1(3) of the Code of Civil Procedure[6]: other rulings, settlements and instruments enforceable by law through judicial execution[7]. Unlike a judgment, it has no res judicata effect[8] and may therefore be challenged by the debtor.
How can the debtor challenge it?
Two actions are available: a declaratory action[9] and an action depriving the enforceable title of enforceability[10]. The debtor may seek a declaration that the listed claim does not exist or is smaller if it objected and no final civil judgment determined the claim. “Objected” means actively refusing acknowledgment, including responding to a creditor’s objection seeking inclusion. Silence therefore amounts to definitive acknowledgment. The opposite interpretation would encourage debtors to make no declarations so as to retain unrestricted scope to challenge the list[11].
A declaratory action is available only until the creditor obtains an enforceable title, meaning an approved-list extract with an enforcement clause. Afterwards, non-existence or a smaller amount can be asserted only through an action to deprive it of enforceability, denying the events underpinning the clause, particularly the obligation established by the title.
What else should creditors know when enforcement begins?
If many creditors participated, they will generally obtain titles simultaneously and may all seek enforcement clauses and execution. The debtor’s assets may be insufficient to pay everyone, and enforcement may even be entirely unsuccessful.
Debtors also commonly file for bankruptcy after failed restructuring. While that application is examined, assets may be secured through suspension of enforcement and lifting bank account attachments, if requested[12]. A bankruptcy order suspends enforcement by operation of law; once final, enforcement is discontinued[13].
Conclusion
A creditor may obtain an enforcement title in accelerated arrangement, arrangement and remedial proceedings. With an enforcement clause, it can initiate recovery of the claim established in restructuring.
A drawback is the debtor’s ability to bring a declaratory action or challenge enforceability, but only where specific conditions are met, so this option is not available in every case.
Practical considerations include insufficient assets for all enforcing creditors and subsequent bankruptcy halting execution. These cannot be predicted in advance and may occur in any enforcement against an unreliable debtor.
[1] Article 2 of the Restructuring Law of 15 May 2015 (consolidated text: Journal of Laws 2022, item 2309, as amended).
[2] Article 65(4) of that Act.
[3] Article 102(1) and (2) of that Act.
[4] Article 102(1) and (2) of that Act.
[5] Article 325(1)(3) of that Act.
[6] Code of Civil Procedure of 17 November 1964 (consolidated text: Journal of Laws 2023, item 1550, as amended).
[7] S. Gurgul, Prawo restrukturyzacyjne, in Prawo upadłościowe. Prawo restrukturyzacyjne. Komentarz, 12th ed., Warsaw 2020.
[8] Ł. Lipowicz in P. Filipiak, A. Hrycaj (eds.), Prawo restrukturyzacyjne. Komentarz, 3rd ed., LEX/el. 2023, Article 102.
[9] The Polish original does not provide the text of this footnote.
[10] The Polish original does not provide the text of this footnote.
[11] P. Zimmerman, Prawo upadłościowe. Prawo restrukturyzacyjne. Komentarz, 8th ed., Warsaw 2024.
[12] Article 39(1) of the Bankruptcy Law of 28 February 2003 (consolidated text: Journal of Laws 2024, item 794).
[13] Article 146(1) of that Act.
