Understanding the Concordat Process in Execution and Bankruptcy Law
The concordat process is an integral aspect of the Execution and Bankruptcy Law, designed to provide a structured approach to preventing bankruptcy by facilitating agreements between debtors and creditors. This guide outlines the critical elements of the concordat process, offering a comprehensive overview of how it operates within the legal framework.
What is a Concordat?
Historically included in our Execution and Bankruptcy Law, a concordat is a legal mechanism that has been seldom applied, mainly due to procedural and timing inadequacies in the legislation and a preference among merchants for bankruptcy postponement. However, significant changes were introduced with the "Law on Amendments to the Execution and Bankruptcy Law and Some Laws" dated March 15, 2018. These amendments have abolished the bankruptcy postponement procedure, promoting the concordat as a preferred alternative.
A concordat is essentially an agreement reached between financially unstable debtors and their creditors to structure the repayment of debts according to a specified plan and schedule, aimed at preventing the interruption of commercial activities and avoiding bankruptcy.
Key Changes in Concordat Regulations
Shortened Procedures: The new law has significantly reduced the timeframes for existing concordat procedures, streamlining the process.
Expanded Applicability: Unlike the previously narrow scope of bankruptcy postponement, the concordat is now accessible to a broader range of entities, including non-merchant individuals and those not necessarily facing bankruptcy.
Jurisdiction Shift: The responsibility for overseeing concordat procedures has transitioned to the Commercial Courts of First Instance, enhancing the specialization of the handling courts.
Eligibility for Requesting a Concordat (EBL Article 285)
Debtor’s Request: Any debtor, facing imminent inability to meet debt obligations, can initiate a concordat to propose a repayment plan either through debt restructuring or reduction.
Creditor’s Request: Creditors can also initiate a concordat for debtors under bankruptcy, but not for those who are non-bankrupt.
Concordat Application Process
The application for a concordat must be submitted through a reasoned petition to the Commercial Court of First Instance, accompanied by relevant financial documents and a preliminary concordat project plan.
Required Documentation (EBL Article 286)
Applicants must attach the following essential documents:
Detailed concordat proposal
Recent financial statements and asset listings
Creditor listing with debt amounts and statuses
Comparative analysis of expected creditor recovery under concordat vs. bankruptcy
Independent financial analysis reports (if applicable)
Review Stages of a Concordat Request
The concordat process involves several critical stages:
Granting of temporary respite
Setting a definitive deadline
Creditors' meeting
Court approval of the concordat proposal
Effects and Binding Nature of a Concordat
Once approved, the concordat binds all creditors, preventing any legal actions against the debtor during the grace period and altering the terms under which creditors can pursue secured debts. The concordat aims to ensure fair and orderly debt resolution, providing a lifeline to struggling businesses and individuals by allowing them to restructure their financial obligations legally.
Conclusion
The concordat process offers a structured and legally endorsed pathway for debt resolution, emphasizing collaboration and compromise between debtors and creditors. It is designed to support the continuity of business operations and prevent the adverse effects of bankruptcy.
For more detailed information or specific inquiries regarding the concordat process, please contact our legal office.
