Restructuring Proceedings. Corporate restructuring is governed by the Restructuring Act. The basic idea of corporate restructuring is the rehabilitation or safeguarding of the viable business operations of the debtor as well as taking up restructuring proceedings in order to meet these objectives. The Restructuring Act also sets out the process for adopting a restructuring program, which includes the measures to be taken in order to restructure the debtor’s business operations. According to the Restructuring Act, the indebted company retains the right to control the normal day-to-day operations of the company during the restructuring period. However, the consent of the administrator is required for significant business decisions, such as the taking out of a new loan. The legal effects of the court's adjudication of restructuring proceedings apply only to “restructuring debts” i.e., debts, which were incurred, at least conditionally, prior to the application for restructuring proceedings became pending, including contested, conditional and unclear debts. Consequently, the commencement of the proceedings does not affect, for example, the debtor's obligation to fulfil a contract requiring specific performance. The commencement of restructuring proceedings results in a period of protection, during which debts that originate from the time prior to the commencement of the proceedings cannot be paid, collected, or enforced, nor can security be placed for such debts. Any arrangements that are committed in violation of this restriction are usually deemed invalid. The period of protection remains in force until the court approves the restructuring program or the court interrupts the proceedings. There are, however, certain exceptions to the restriction to pay, collect or enforce restructuring debts during the protection period. With regard to contracts that have been entered into before the commencement of the restructuring proceedings, if the obligations of the debtor's counterparty have not been (or have only partly been) performed, the counterparty is entitled to receive payment or partial payment, as the case may be, for its performance, regardless of the prohibition, provided that the performance is deemed normal with respect to the debtor's business. If, on the other hand, the performance is deemed unusual, the administrator has the right to decide whether or not the debtor will accept further performance of the contract. If the administrator decides that the debtor will not accept furt...
Restructuring Proceedings. A company that is in financial difficulties may apply to the court for a decision on the initiation of restructuring proceedings. The application may also be submitted by a creditor (for example a person who has financed the company) or by a probable creditor, i.e. a person to whom the insolvency of the debtor is likely to cause financial losses relating to a claim (for example a person who stands as surety for the company). An application for the restructuring of a company takes precedence over an application to institute bankruptcy proceedings until such time as the court makes a decision with regard to the initiation of restructuring proceedings. If bankruptcy proceedings have already been filed against the company, an application for restructuring must be made before the company is formally declared bankrupt. The Restructuring Act is intended to allow the initiation of restructuring proceedings at a sufficiently early stage before a company's financial problems have resulted in insolvency. An application for restructuring proceedings may be made when a company is imminently threatened with insolvency. In such a case restructuring proceedings can be commenced at the initiative of a creditor or a probable creditor only if it is necessary for the protecting of or preventing endangerment to the creditor’s considerable financial interest. On the other hand, an application may be made even when a company is already insolvent. If this is the case, restructuring proceedings may be undertaken only if there is a reasonable possibility of remedying the company's situation in a permanent manner.
