The pandemic impacted a number of businesses in Poland. To prevent some of its negative consequences a moratorium on the filing of bankruptcy declarations was introduced in Polish law on 13 April 2020.
The coronavirus was first uncovered in Poland on 4 March 2020. On 20 March, a “state of epidemic” was announced (and it lasts since then) and the first lockdown took place. The government prohibited everyone from leaving their home except in cases of travel to work and purchase of basic products. It then became obvious that closure of the economy would mean that some firms, prior to receiving aid from the government, would become insolvent, which by law would require them to file for a declaration of bankruptcy (or restructuring). Furthermore, a sudden deluge of such applications in court would lead to enormous delays in their review. As a result, prior to debtors receiving protection against enforcement, their assets (funds in bank accounts and equipment) would be seized by bailiffs acting on behalf of creditors and staff would be let go.
In order to prevent this, a so-called moratorium on the filing of bankruptcy declarations was introduced in Polish law on 13 April 2020.
In the case of a company becoming insolvent, the management board (or any one of its members) should file a bankruptcy application. The deadline is 30 days from the date when a company becomes insolvent, i.e., it loses the ability to meet its due monetary liabilities. It is presumed that such a state arises if delay in meeting monetary liabilities exceeds 3 months. If a company does not file a timely application to declare bankruptcy (or commence restructuring), management board members are personally liable for satisfaction of company debts. A dilemma would arise: file for bankruptcy to protect against personal liability for company debts or risk waiting with such application. The moratorium resolved this dilemma.
It stipulated that if insolvency arose during the state of epidemic and due to COVID-19, the 30 day deadline for a company to submit a bankruptcy application does not commence (and that which has commenced is suspended). If insolvency arose during a state of epidemic, it is presumed that it appeared due to COVID-19.
Konrad Grotowski, attorney-at-law, Restructuring & Bankruptcy practice, Wardyński & Partners
The content of this article is a part of Episode 1 of the programme News from Poland – Business & Law. You can watch the episode here >>>