Insolvency is the condition of a debtor’s assets characterized by insufficient available monetary funds for the payment of certain, liquid, and due debts. This condition is presumed when the debtor has not paid their debt to the creditor within 60 days from the due date (the presumption is relative), or when it is proven that the debtor will not have available monetary funds on the due date.
On the other hand, insolvency proceedings are a collective procedure established to cover the liabilities of the debtor, with the provision, whenever possible, of a chance for the recovery of their activities.
In order to protect the rights of creditors and to maintain a healthy economic environment, Law 85/2014 assigns to the debtor in a state of insolvency the obligation to formulate, within a maximum period of 30 days from the appearance of the insolvency state, an application to be addressed to the court, requesting the application of the insolvency law.
Failure to submit or the late submission by the legal representative of the legal entity of the application to initiate insolvency proceedings within a period exceeding 6 months from the appearance of the insolvency state constitutes the offense of simple bankruptcy, punishable by imprisonment from 3 months to one year or by a fine.
However, considering the challenging economic situation caused by the restrictions imposed by the Covid 19 pandemic and its particularly economic consequences, the legislator adopted Law no. 220/2022.
Among the provisions of the normative act is the idea that the request for entry into insolvency proceedings should be optional for debtors, but this provision was temporary in the sense that for a period of one year from the entry into force of the law, until 22.07.2023, debtors already in a state of insolvency or those who subsequently find themselves in this situation are exempt from the obligation to request entry into the special procedure from the court.
This law temporarily reintroduced the rule of optionality, which expired at the end of the day on July 22, 2023, meaning that the mandatory 30-day period began to run again from July 23, 2023.
It should be noted that in the absence of a legal obligation to request entry into insolvency, the effects affect not only the debtor, whose chances of recovery decrease, but also the creditors and, in general, the health of the business environment.
Therefore, the obligation of submission by the debtor in a state of insolvency of an application to initiate proceedings produces effects again starting from July 23, 2023.
Daniel Pavelescu – Attorney at Law