With the abolition of the postponement of bankruptcy in 2018, concordat (composition with creditors) became the main restructuring tool for companies in financial difficulty. For creditors, a concordat petition halts the collection process and raises the prospect of giving up part of the claim. For this reason, creditors need to be active at every stage of the process.
Provisional and definitive moratorium
When an application is filed with complete documents, the court grants a three-month provisional moratorium and appoints a concordat commissioner. This period may be extended by up to two months. If the conditions are then met, a one-year definitive moratorium is granted, which may be extended by a further six months in exceptional circumstances. During the moratorium, no enforcement proceedings may be brought against the debtor except for secured claims, pending proceedings are stayed, and interim injunctions are not enforced.
What creditors should do
- Filing the claim: The claim must be submitted to the commissioner with supporting documents within fifteen days of the commissioner's public announcement. A creditor who does not file cannot vote on the plan, and its claim is taken into account only to the extent that it is recorded in the debtor's books.
- Creditors' meeting: The concordat plan is approved by more than half of the registered creditors holding more than half of the claims, or by more than one quarter of the creditors holding more than two thirds of the claims. It is strategically important for the creditor to attend the meeting and vote.
- Objection and approval stage: A creditor who objects to the plan may present its objections at the approval hearing. The court reviews whether the plan was prepared in good faith and whether it offers creditors a better outcome than bankruptcy would.
Position of secured creditors
Secured claims are not affected by the moratorium. Proceedings for the enforcement of the pledge may be brought, but the sale stage is suspended for the duration of the moratorium. For the portion of the claim that exceeds the value of the collateral, the secured creditor takes part in the process like an ordinary unsecured creditor.
Approval of the concordat and afterward
An approved concordat is binding even on creditors who voted against the plan. If the debtor fails to make the payments, a creditor may request cancellation of the concordat with respect to itself. For corporate creditors, having a legal representative handle negotiations and voting in concordat cases is important for securing changes to the plan in the creditor's favor.