O NOUĂ ETAPĂ ÎN DEZVOLTAREA ŞI CONSOLIDAREA UNEI „CULTURI A SALVĂRII ŞI A PREVENŢIEI ÎN BUSINESS” ÎN SPIRITUL UNUI INSTRUMENT JURIDIC EUROPEAN DE TIPUL HARD LAW TRANSPUNEREA LA NIVEL NAŢIONAL A DIRECTIVEI (UE) 2019/1023
A NEW STAGE IN THE DEVELOPMENT AND STRENGTHENING OF A “RESCUE CULTURE AND PREVENTION IN BUSINESS” IN THE SPIRIT OF AN EUROPEAN LEGAL INSTRUMENT OF THE HARD LAW TYPE. TRANSPOSITION AT NATIONAL LEVEL OF DIRECTIVE (EU) 2019/1023

Summary/Abstract: Here we are in the second year marked by the global pandemic generated by Covid-19. Activity in many sectors has diminished and partially adapted to pandemic restrictions. However, we all feel the need to consolidate the recovery and relaunch process. For those of you who are still in some form of blockage, discouragement, we hope that you will be able to identify a “shadow” of hope as a result of this virtual “journey” through insolvency, a field that is enjoying a real reform at the level of each state and implicitly at the national level, Covid-19 becoming a catalyst for repositioning the image of insolvency in the current socio-economic context by prioritizing reorganization, recovery and giving a second chance to debtors in financial difficulty. The year 2020 represented the start of an economic and social decline, but also the start of a profound legislative reform, especially regarding the “key” norms aimed at the economy, such as the field of insolvency, reason for which we will start from the premise that any crisis also becomes an opportunity for significant reform in society. Maybe the pandemic triggered a phenomenon of “phoenix” type in which the economy will be reborn from “its own ashes”. One thing is certain, the “rescue culture” that can be generated by the insolvency procedure is now claimed by society itself, through the need to relaunch and reset. Promoting the granting of the “second chance” to the debtor in financial difficulty is no longer just at the stage of giving satisfaction to union and international bodies that have long strived to shape it and which states have gradually embraced and timidly implemented, but it is becoming a reality, which appears to us more than ever and is a second chance for Romania as well, an efficient approach to the legal instruments offered by the insolvency procedure becoming essential for the reactivation of the levers of economic and social progress. The article captures a brief overview of the “footprint” left so far by the onset of the Covid-19 pandemic on the legislative “picture” in the field of insolvency, respectively Law no. 55 of 15 May 2020 on certain measures to prevent and combat the effects of the COVID-19 pandemic, in which the legislator allocated a number of articles, we could even say generously, dedicating Section 8 exclusively to the matter of insolvency, but also Law no. 113/2020 on the approval of the Emergency Government Ordinance no. 88/2018 for the amendment and completion of some normative acts in the field of insolvency and other normative acts. In fact, Law no. 113/2020 has become practically a “mirror” of Law no. 55/2020, a series of measures adopted during the alert state now becoming permanent measures. We also focused on the effect “hidden insolvencies”, insolvencies that instead of being prevented, were postponed, on the one hand, for fear of stigma, and on the other hand, due to the “false comfort” of the measures extended by the temporary insolvency legislation, a “dilution” of certain temporary measures ultimately leading to the failure of a restructuring chance and the direct entry into bankruptcy. Here, too, we consider first of all the option given to insolvent debtors to request or not the opening of insolvency proceedings during the alert state. Of course, another major factor that blocked the manifestation of domino effect of insolvency in 2020 is that, unlike any previous crisis, states have “injected” massive amounts of liquidity into the economy, temporarily preventing a corporate capital crisis. In essence, we should have witnessed a massive wave of insolvencies now, but state intervention has created that state of calm before the storm, allowing debtors in financial difficulty to avoid insolvency, at least for now. The effect of “hidden insolvencies” in a visibly contracted economy is found in most states, respectively Germany, France, the United Kingdom, Japan, India, Singapore or Australia, which voted including in the first quarter of 2021 to suspend the obligation to apply for insolvency of companies in financial difficulty, which allows the so-called zombie companies to continue their operations, although, literally, they are becoming more and more fragile, a wave of insolvencies “waiting around the corner”. In Romania, over 7000 companies are listed with debts of over one million lei to the state budget, and debts to the state budget continue to grow, accumulating so far 73 billion lei, and we refer here to those pillars of the economy which will trigger a domino effect absolutely irreversible on the Romanian market if it does not recover in time. The impact generated will not only be economic, but also social, as these companies provide over 130,000 jobs, jobs behind which “pulse” lives, families, and the only chance would be a judicial reorganization procedure. We were saying that the pandemic started a change of perception, through which humanity supported the “new” more easily out of the need to adapt, digitalization reached unimaginable levels, the legislation underwent a surprisingly fast modelling, which makes us believe as the culture of second chance and prevention in business it can “take strong roots” against the background of the health, social and economic crisis. Why? Because we are looking at things much more deeply. It is our chance to make the transition to a new chapter of the business environment by eliminating the stigma of insolvency and developing the spirit of negotiation. In essence, the chances of companies’ survival will depend on how quickly they react to warning signals, the options offered by the legislation, using all relevant information in an alert way and constantly adapting to unpredictable and oscillating socio-economic scenarios. We can say with certainty that Law no. 85/2014 on insolvency prevention and insolvency proceedings has received increased attention in recent years, undergoing numerous changes, often unpredictable and in the opposite direction to the proposed line of regulations and vision at EU level. And here we refer especially to GEO no. 88/2018 which marked the legislative regression in the field of insolvency for almost 2 years, regression “neutralized&” by the entry into force of Law no. 113/2020 regarding the approval of GEO no. 88/2018 and which has become the probable path to a new progress of insolvency law, again in the attention of the legislature. It deserves its attention not only by virtue of its socio-economic dimension which gives it an uninterrupted and alert pace of legislative reform, but because time is running out and Directive 2019/1023 is required to be transposed at national level by 17 July 2021, at least in relation to certain elements. Therefore, we are talking about a new draft law that will soon amend Law no. 85/2014, a project that has already been launched by the Ministry of Justice for public debate and which this time strictly targets the prevention and restructuring part. In other words, the project reinforces society’s need to develop a “rescue culture”. What does the new insolvency draft law elaborated in the spirit of the Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) 2017/1132 (Directive on restructuring and insolvency) entail? The aims of this European legal instrument of the type hard-law aims at two important levels, namely: legislative harmonization/standardization at EU level in the field of insolvency and developing a rescue culture which can be achieved, on the one hand, through solid insolvency prevention procedures, and on the other hand, by promoting and accessing the judicial reorganization procedure in the insolvency phase. It is important to note that EU insolvency law has so far focused on regulating cross-border insolvency proceedings and has addressed, in particular, issues related to the jurisdiction of courts, recognition of the effects of proceedings in other Member States and conflicts of laws. In this sense, Directive 2019/1023 is the first major step in the process of harmonizing the various European insolvency laws, going beyond the stage of implementation of rules, standards that are limited to cooperation between courts and coordination of insolvency proceedings of a cross-border. The sources of European insolvency law are varied. Traditionally, experts have divided them into two categories, as they relate to effective laws or non-binding legal instruments. The first category consists of regulatory instruments that are mandatory (hard law), while the second consists of recommendations, advice, codes of good practice and everything that broadly refers to the idea of non-binding or permissive regulation (soft law). Currently, the sources of European cross-border insolvency law remain as follows: Regulation 848/2015, which is mandatory, including Annexes A, B, C and D, Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee - A new European approach to business failure and insolvency, which is non-binding, the European Communication and Cooperation Guide for cross-border insolvency (CoCo Guidelines), which is non-binding and the new Direction (EU) 2019/1023 on restructuring and insolvency, which entered into force on 16 July 2019 and which is binding. Concluding in this respect of convergence of insolvency rules at European level, we can only reiterate what the European Law Institute has said, namely that we are witnessing “an alert and sometimes even relentless pace of insolvency law reform”, a field that will enjoy a coherent harmonization of norms and standards at union and international level, without conflicting with the major principles, values and traditions of national systems, as the steps are small but secure, as long as give priority to instruments such as “hard law” and not “soft law”. The second level covered by Directive 2019/1023 is represented, as we said, by early restructuring through pre-insolvency proceedings and judicial reorganization from the phase of installing the state of insolvency, elements that shape the culture of prevention and rescue in business, reason for which we proposed that through the research carried out to cover in a broad sense the most important aspects covered by the Draft law for amending and supplementing Law no.85/2014 on insolvency prevention and insolvency procedures, without proposing an exhaustive presentation of it. Looking to the future, we “cling” to the hope that the new legislative changes anchored especially in the field of prevention in business and less in the field of effective insolvency and judicial reorganization and to transpose EU Directive 2019/1023, will shape the national culture towards eliminating the stigma of insolvency and opening society in general to a “second chance” will positively boost Romania’s restructuring market in the coming months and, in general, business, the new regulatory framework being an important and effective stage for restructuring practice in our country, because here, we enjoy dedicated professionals, highly trained and appreciated at European level in the field of insolvency, who have set out to create competitive tools on the international market. This trend in regulation is proving to be all the more valuable when persistent COVID-19 restrictions adversely affect entire industries for the foreseeable future. Moreover, unlike other countries that have requested postponement for implementation, Romania is on the list of countries that are on schedule for the timely transposition of Directive 2019/1023, the deadline being July 2021. Of course, there are also countries, such as Germany, that have already transposed the European Directive. Although there will be a gap in the implementation of the Directive in the Member States, legislative uniformity in the field of insolvency, at least in terms of prevention and second chance, is becoming a certainty. We hope that the Draft law that will amend Law no. 85/2014 in the spirit of the Directive to represent just another stage in the development of a rescue culture of debtors in financial difficulty, as there are many more elements to capitalize on in this “puzzle” that the European Union is striving to build in the field of insolvency law. This time the legislator focused very much on the prevention side, insolvency prevention procedures, a legislative level that really needed to be upgraded at national level and which proved to be a solution especially in times of health, social and economic crisis, against the background of the epidemiological situation worldwide, the year 2020 representing the year in which most arrangement with creditors procedures have been accessed since their regulation at national level until now. This demonstrates once again the importance of the socio-economic context that can change the direction of a company’s culture, the perception of legal mechanisms and instruments, as well as the maturation of the business environment that has learned to “cling” to any opportunity to save and maintain the market. And yes, the path of preventive restructuring must be taken seriously, which is the chance to “reduce the curve” of bankruptcies that risks overwhelming Romania’s economic environment. However, the field of insolvency will have to be reformed much more deeply in terms of the judicial reorganization procedure, which in fact complements this “rescue culture and giving a second chance” to debtors in difficulty, a field that has been quite little in the draft law aimed at transposing the Directive into national law. This of course involves step-by-step measures to decode the mechanisms and assimilate them into the socio-economic environment. Consequently, in the context of the above and of the anticipatory philosophy as well as in support of a “rescue culture” and promotion of the ,,second chance”, we appreciate that it is necessary that insolvency practitioners specialize in the area of restructuring, reorganization. In reforming the restructuring framework, it would be auspicious also to generalize the condition for proving the negotiation of a payment agreement by creditors requesting the opening of insolvency proceedings, not only in the case of debtors who have ceased their activity totally or partially as a result of the Covid pandemic. It would be a takeover from the current Law no. 55/2020 stipulating temporary measures in the field of insolvency and which would strengthen the development of the culture of negotiation and increase the visibility of insolvency prevention procedures, both creditors and debtors bending, all the more so given that this becomes an obligation, on prior negotiations and on the benefits of preventing insolvency. In fact, Law no. 113/2020 expressly introduced the instrument of the payment agreement, with the role of promoting such extra-judicial agreements. A sensitive point is still the legal regime applicable to SMEs. The current draft law has tried to draw up a regulation to support them, but only in the field of prevention. And here we have in mind the possibility for SMEs with a turnover of less than 1 million euros to benefit from a fully out-of-court solution by concluding a restructuring agreement that coagulates the unanimity of the votes of the affected creditors. It is important that in the future SMEs can also benefit from a simplified insolvency regime, not just pre-insolvency, especially a simplified judicial reorganization procedure. Let us not forget, however, the field of insolvency in general, which for some time has enjoyed a real expansion and legislative branching, reflected both by Law no. 151/2015 on the insolvency of individuals, respectively the insolvency of administrative-territorial units, regulated by Government Emergency Ordinance no. 46/2013 and approved by Law no. 35/2016, “legislative architecture” that needs to be harmonized at the level of the European Union. As a matter of urgency, it would be necessary to simplify the insolvency procedure of the natural person regulated by Law no. 151/2016, taking into account the excessive conditions and restrictions imposed by the legislator, an aspect that also results from the fact that so far only 25 persons have resorted to this procedure. On the other hand, the stigma of insolvency has also left its mark on the administrative-territorial units, the local authorities being still reluctant to address such legislative instruments, which currently do not enjoy jurisprudence or doctrinal encouragement. However, the development of concrete strategies for financial recovery in this field becomes of great interest in the current economic context, an absolutely essential approach being the approach of comparative law, which settles the feeling of security in such rules, in the idea that insolvency finds its application in many developed countries that have thus managed to rebalance themselves financially and can become examples of good insolvency practices. Above all, let us not forget the social impact of developing a culture of prevention and rescue, the interference of insolvency law with labour law, Directive 2019/1023 outlining the interaction between the economic and social spheres that characterize both insolvency, because beyond economic reality and profit barriers, the legislator tries to tip the balance towards a harmonious, balanced social climate, through social responsibility, which favours, at the same time, the economic expansion of an enterprise but also of a society as a whole. What is certain is that we need a legislative consolidation of social protection in general, as the devastating impact of the global financial crisis generated by the COVID-19 pandemic will deepen the “scars” on our economy and society, being essential to learn the lessons of these crises, but also of previous crises in order to be able to cover the vulnerabilities of our legal system. Here, too, we should reflect upon the dimension of digitalization and the development of artificial intelligence, which also means the loss of jobs. Interesting and gloomy, at the same time, is the statement of Klaus Schwab, the founder of the Davos Forum, who recently stated that “the physical world will become smaller than the new digital world”.

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