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What changes does the Law 277/2009 bring to the Law 85/2006

What changes does the Law 277/2009, from July 7, 2009, bring to the Law 85/2006 referring to the insolvency procedure, regarding the contractual relations from the debtor and its creditors

Regarding the contracts between the debtor and its creditors, the new law, adopted at the middle of July, brings a few changes that are meant to solve the problems the practitioners came across so far. A first change refers to the ongoing contracts. These contracts will be kept on at the opening of the procedure. A stipulation stating that such contracts will be abolished because the insolvency procedure was started against the debtor is null and void.

This does not mean that the judicial administrator would not be entitled, as it was before the law changed, to cancel any contract, the expired leases or other long-term contracts, as long as these contracts have not been entirely or substantially executed by all parties.

The new law clarifies the moment when the contract is considered terminated: a) at the expiration of a period of 30 days from the receipt of the cancellation request from the contractual partner, if the judicial administrator / liquidator is not liable b) at the moment when the judicial administrator/liquidator notifies the termination of the contract. We can consider again that the law was changed according to the theorist’s opinion, that the termination of the contract operates at the deadline of the period of 30 days within which the judicial administrator / liquidator will be able to exercise their option.

The new law gives more freedom of decision to the judicial administrator. He no longer needs the approval of the Creditors Committee to modify the clauses of the credit contracts, so that they ensure the equivalence, the fairness of the future performances. The goal is probably speeding up the procedure, as well as avoiding a possible conflict of interest.

The law doesn’t say if the judicial administrator will be able to exercise his option for the purposes of termination of credit agreements, but we believe that this emerges from the text of the article.

However, another question is if the approval of the contractual partner is needed.

We believe the answer is no, since the article 969 from The Civil Code states that the legal agreements can be revoked by mutual consent or in cases authorized by law. This is such an authorizes case, taking into consideration the judicial administrator’s role, the one of protecting the debtor’s patrimony.

Regarding a contract that involves periodical payments from the debtor, if such a contract is maintained, it won’t be compulsory for the judicial administrator to make outstanding payments for the period before the opening of the procedure. For such payments, a statement of claims against the debtor may be formulated.

The doctrine said that for the outstanding sums of money, the creditor can formulate a claim against the debtor, and the creditor will have to act as a regular unsecured creditor, becoming part of the procedure with his amount.

Finally, the new law introduces a clarification regarding the situation of the obligations resulting from the sale pre-contracts, that were made before the opening of the procedure, the debtor being the one that promises to sell. The obligations will be executed by the judicial administrator / liquidator at the request of the buyer, if certain conditions are met. First of all, the pre-contract must bear a definite date, which means that an unregistered instrument, or one that was not given a definite date by a lawyer, or one that has not been authenticated by a public notary cannot benefit from the provisions of this article.

Additionally, the price must have been fully paid, or the possibility of it being paid at the date of the request must exist. The goods should be in the possession of the buyer, the price mustn’t be inferior to the market value, and the goods mustn’t have a determinant importance for the success of a reorganization plan.

At first glance, the collocation “the price of the contract shall have been fully paid or the possibility of it being paid at the date of the request must exist ” makes us think of an inequity, for if the understanding of the parties was to conclude the sale contract at a later date, the entry into insolvency shall oblige the debtor to surrender ownership of the property at this time, so that damages could result to both sides and the principle found in article 969 of The Civil Code could be violated.

However, we should look at the purpose of the closing of this pre-contract. Isn’t it defrauding the creditors, for example by maintaining the good in the heritage of the seller, even after the price has been paid?

Then we should take into account the fact that the judicial administrator, can now decide together with the buyer, to change the initial will of the two parties (the seller and the buyer).

Then we must take into consideration the benefit brought to the debtor, by selling the assets at a right price, because in addition to the payment of the price, that mustn’t be inferior to the goods value, the goods must be highly important for the success of a reorganization plan.

To conclude with, our opinion is that the new law is welcome, since it gives legal efficiency to the doctrinaire’s opinion. It also gives more freedom to the judicial administrator, the procedure becoming more urgent. These changes will also give more protection to the debtor, supporting him in his attempt to reorganize.

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