Insolvency - Bankruptcy

After approximately one and a half century, Greece has a new Bankruptcy Code enacted by Law 3588/2007 in force from 16 September 2007, published in the Government Gazette issue A 153/16.07.2007. Bankruptcy Code has been amended by the Laws 4013/2011, 4055/2012, 4072/2012 and 4336/2015 mostly in order to introduce modern restructuring rehabilitating proceedings.

The Bankruptcy Code is a development of many efforts taken during the last seventy years. Greece, as many other countries, had initially introduced the French Commercial Code. Bankruptcy was regulated by the Commercial Code (arts 525-707). The main purpose of bankruptcy was the liquidation of the bankrupt’s property as a collective enforcement procedure aiming at the satisfaction of the creditors. Starting with Law 1386/1983, Greece adopted a reorganization approach which later developed, through Law 1892/1990, into another collective enforcement procedure with the main purpose of keeping the debtor’s enterprise as an ongoing business concern providing a second chance to the debtor. The results of the Greek insolvency system were poor. More than three-fourths of the initiated bankruptcy proceedings ceased their works because of lack of sufficient assets to cover the costs of proceedings. Only approximately five percent of business under reorganization mechanisms, were rescued, and even these with uncertain final results.

How the Greek insolvency system has changed in the last years?

For many years, enforcement system used to be the main impediment for any potential investment initiatives. However, in the rise of the crisis, Greek Law has demonstrated considerable steps towards modernization. These steps have increased, to an important extent, legitimacy between creditors and debtors and made the system more efficient.

Indicatively, the amendment of the Greek Civil Procedure Code introduced process simplification and quicker resolution. Also, the last amendment of the Greek Bankruptcy Code abandoned the previous cumbersome regime and retained only the pre-pack agreement. Lastly, the introduction of special administration in Greece promised a more efficient and faster procedure compared to special liquidation.

What are the mechanisms for insolvency cases?

First of all, an important distinction needs to be made between amicable and non-amicable cases. In the first category, the available tools are restructuring (known as “Rehabilitation Agreement”) according to articles 106b and 106d L. 3588/2007, Out of Court Workout according to L. 4469/2017, rehabilitation through the bankruptcy process, while bilateral restructuring process extra judicially is still an option. In the second category, the options are the individual execution measures according to Greek Civil Procedure Code, special administration according to article 68 seq. L. 4307/2014, creditors’ rehabilitation plan (without debtor’s consent) according to article 104 L. 1588/2007 and of course bankruptcy procedure.

INTRODUCTION

Over the last years, due, among other reasons, to the Greek financial crisis, bankruptcy and insolvency law in Greece has become a field of intense debate and has been amended several times. In the present briefing, we refer to the position of the creditors in the course of restructuring and insolvency procedures as they currently stand. In particular, we refer to the position of the creditors in the context of the bankruptcy procedure, the special administration procedure and the pre-bankruptcy reorganization procedure. We do not refer to procedures of consensual restructuring, forced management, liquidation pursuant to corporate law, transfer of loans according to the legal framework on non-performing loans (NPLs), Law 3869/2010 on over-indebted households or insolvency of special categories of debtors (e.g. banks and insurance companies).

THE POSITION OF THE CREDITORS IN CASE OF BANKRUPTCY

In case of bankruptcy, there exist, in principle, two options for the completion of the procedure: i) the liquidation of the debtor’s property, and ii) the entry into a restructuring plan.