A draft bill establishing an out-of-court debt settlement mechanism for businesses was posted on the government’s opengov website on Tuesday, for a 10-day period of public consultation between now and 14:00 on March 3.
The new legislation will for the first time create a process that allows businesses to reach a debt settlement with all its creditors – including banks, tax authorities, social insurance funds and suppliers – without going through the courts.
Under its rules, if a 60 pct majority of the creditors reaches consensus on a sustainable solution, this solution can then be imposed on the dissenting minority. A majority as defined by the draft bill is formed on the basis of the percentage of the total debts owed by the company to the participating creditors.
It also ushers in a mechanism where business with outstanding debts to the state and social insurance funds can continue to operate and generate income to pay the public sector without being forced to declare bankruptcy, based on their real ability to pay.
The measure is open to companies of all sizes, provided the debt to be settled exceeds 20,000 euros, but not freelance workers who can apply for debt settlement under the Katseli law.
It cannot, however, be used to settle debts generated after December 31, 2016 or if 85 pct of a company’s total debts are owed to a single creditor, while the process is fully confidential for all parties involved.
Among those barred from using the process are banks, credit companies, providers of investment services (brokerages etc), insurance firms, organisations for collective investments in securities (e.g. hedge funds), legal entities that have filed for bankruptcy or liquidation or have already stopped their business operations or businesses whose senior management or representatives have a final conviction for tax evasion, embezzlement or fraud at the expense of state entities, money laundering, extortion, forgery, bribery, illegal trade, bankruptcy or defrauding creditors.
The process will be carried out via a special electronic platform and the use of mediators that will assist in the negotiating process, activating an institution of arbitration that remained essentially inactive since it was established.
Economy and Development Minister Dimitri Papadimitriou noted that the draft bill seeks to establish a comprehensive legal framework that facilitates the debt settlement for viable businesses, reducing their debt burden while allowing them to continue operating, “while at the same time protecting thousands of jobs and restoring a healthy banking system, to support the economy as a whole.”