Poland

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🡢 Insolvency and restructuring procedures 🡢 Insolvency office-holders and courts 🡢 Position of directors 🡢 Position of creditors

🡢 Setting aside transactions 🡢 Cross-border insolvency 🡢 Other matters 🡢 Contacts

1. Insolvency and restructuring procedures

1.1 – What are the main insolvency and restructuring procedures applicable to companies?

Insolvency procedure:

Insolvency involving liquidation of the insolvent’s assets;
Insolvency with the possibility of an arrangement.

Restructuring procedure:

Arrangement approval proceedings (Postępowanie o zatwierdzenie układu)

Allows for the formation of an arrangement without court involvement through the collection of creditors’ votes, provided that the sum of contested claims entitled to vote in the arrangement procedure does not exceed 15% of the total sum of claims entitled to vote in the arrangement procedure.

Accelerated arrangement proceedings (Przyśpieszone postępowanie układowe)

This type of proceedings requires court involvement. The procedure is initiated through a court motion by the debtor.
The proceedings might be conducted if the sum of contested claims entitled to vote in the arrangement procedure does not exceed 15% of the total sum of claims entitled to vote in the arrangement.

Arrangement proceedings (Postępowanie układowe)

The procedure is initiated through a court motion filed by the debtor.
The proceedings might be conducted even if the sum of contested claims exceeds 15% of the total claims eligible to vote on the arrangement.

Reorganization proceedings (Postępowanie sanacyjne)

This is the most invasive procedure, but it also allows for the highest level of protection for the debtor.
The debtor is deprived of their ability to manage their enterprise as a court manager is appointed.
The procedure is initiated through a court motion filed by the debtor, by a curator appointed under the Polish Civil Code, and if the debtor is insolvent, the procedure can be initiated by their personal creditor.

1.2 – Can a company obtain a moratorium whilst it prepares a restructuring plan? If so, what is the effect of the moratorium?

Arrangement approval proceedings

Protection from enforcement is activated as of the date of publication of the notice of the arrangement day in the National Debt Register. It occurs through the suspension of all pending enforcement proceedings conducted to satisfy claims from the debtor’s assets. At the same time, as of that date, it becomes inadmissible to initiate new enforcement proceedings and to execute the order securing the claim or the order securing the claim on the debtor’s assets.

Accelerated arrangement proceedings and arrangement proceedings

Enforcement proceedings concerning a debt covered by the arrangement, initiated prior to the day when the accelerated arrangement proceedings or arrangement proceedings were opened, are suspended by operation of law on the day when the proceedings are opened.
The initiation of enforcement proceedings and the enforcement of a ruling on securing a claim or ordering securing a claim resulting from a debt covered by the arrangement is inadmissible after the day when the accelerated arrangement proceedings or arrangement proceedings were opened.

Reorganization proceedings

Enforcement proceedings directed at the debtor’s assets included in the restructuring estate initiated prior to the day of the opening of reorganization proceedings are suspended by operation of law on the day of opening the proceedings.
After the day of the opening of reorganization proceedings it is inadmissible to direct enforcement at the debtor’s assets included in the restructuring estate or execute a ruling on securing a claim or order that a claim be secured on these assets.

The suspension results in a stay of the enforcement proceedings, effectively freezing them in their current state.

1.3 – How long will it generally take for a creditor to achieve the liquidation of an insolvent company, assuming an undisputed claim and no opposition from the company?

Between 1 to 2 years.

1.4 – Does your jurisdiction make use of a distressed sale process by which the business/assets of the company can be sold?

The process most closely resembling a distressed sale in Polish law is known as a “prepared liquidation” (przygotowana likwidacja), derived from the “pre-pack” procedure in common law jurisdictions.

Initiation:

The procedure can be initiated by a motion filed by either the debtor or the petitioner who filed for the debtor’s insolvency.
The motion can be filed simultaneously with the insolvency petition or after insolvency proceedings have commenced, but not before.

The motion concerns the sale or purchase of the debtor’s:

Entire enterprise;
Organized parts of their enterprise; or
Assets constituting a significant portion of their enterprise.

2. Insolvency office-holders and courts

2.1 – Who can act as an insolvency office-holder?

The Polish equivalent office is the position of a trustee in insolvency. The function of a trustee may be performed by an individual who has full legal capacity and a license of a restructuring advisor and has a restructuring advisor account in the information and communication system supporting court proceedings. This function may also be performed by a commercial company whose partners who bear liability for the company’s obligations without limitation with all their assets, or whose members of the management board who represent the company have the license of a restructuring advisor and has a restructuring advisor account in the information and communication system supporting court proceedings.

2.2 – Who decides the identity of the insolvency office-holder, and what restrictions apply?

The court shall appoints a trustee in insolvency, taking into account the number of cases in which a person holding a restructuring license performs the functions of a court supervisor or receiver in restructuring proceedings or a trustee in other insolvency proceedings, as well as such person’s experience and additional qualifications.

Ineligible to be a trustee is a natural person or a commercial company or partnership, which:

is a creditor or debtor of insolvent; a spouse, ascendant, descendant, sibling, relative by affinity of the insolvent or, in the same line or to the same degree, of the insolvent’s creditor; a person connected with the insolvent by the relationship of adoption or the spouse of such person, or a person cohabitating with the insolvent, maintaining a common household with them;
has been or was employed by the insolvent under an employment relationship or performed work or rendered services for the insolvent under another legal relationship;
has been or was a member of a body, a procurator or an attorney of the insolvent, or has been or was in the period of two years preceding the filing of the insolvency motion, a partner or shareholder holding shares in excess of 5 % of the initial capital of a debtor or creditor, and in the case of a simple joint-stock company in excess of 5 % of shares of this company;
has been or was a company or partnership related to the insolvent, or has been or was a member of a body, a procurator or an attorney of such company or partnership, or has been or was in the period of two years preceding the filing of the insolvency motion a partner or shareholder holding shares in excess of 5 % of the initial capital of a company or partnership related to a debtor, and in the case of a simple joint-stock company – in excess of 5 % of shares of this company;
performed the function of a supervisor or receiver in restructuring proceedings previously conducted in respect of the insolvent.

2.3 – Are insolvency cases heard by specialist judges, or in the general commercial courts?

The cases are heard in commercial departments of general courts by judge-commissioners.

3. Position of directors

3.1 – To what extent do the directors of the company remain in control of its affairs during any of the procedures described above?

Insolvency procedure:

The insolvent is not deprived of their legal capacity or capacity to perform legal acts.
The insolent, however, loses the attributes associated with ownership of the assets that compose the insolvency estate, i.e., they cannot dispose of, manage or, in principle, use the assets that compose the insolvency estate.
Companies or organizational units exercise their capacity to perform legal acts in relation to the insolvency estate through the trustee in insolvency.

Restructuring procedure:

The debtor is not deprived of their legal capacity or capacity to perform legal acts. The degree of limitations on the debtor’s capacity to perform legal acts varies between procedures, with arrangement approval being the least restrictive and reorganization being the most restrictive.

Arrangement Approval Proceedings

In order to prepare the arrangement proposals, conduct the independent collection of votes, and submit the application for approval of the arrangement, the debtor concludes a contract for supervision of the conduct of the proceedings with a person who shall act as supervisor of the arrangement.
The supervisor of the arrangement does not restrict the debtor in the management of their assets.

Accelerated Arrangement Proceedings and Arrangement Proceedings:

The debtor is not deprived of their ability to manage; however, they are monitored by the court supervisor while conducting management activities. The supervisor is appointed by the court, not the debtor.
As a rule, the debtor can perform acts of ordinary management. To perform acts exceeding the scope of ordinary management, the consent of the court supervisor is required, unless the law provides for the consent of the board of creditors.
The court can deprive the debtor of their ability to manage and appoint an administrator under the following circumstances:

The debtor, even unintentionally, has violated the law in the exercise of management, resulting in prejudice to creditors or the possibility of such prejudice in the future.
It is evident that the manner of management does not guarantee the performance of the arrangement, or a curator has been appointed for the debtor.
The debtor fails to comply with the instructions of the supervisory judge or the court supervisor, in particular, has failed to submit arrangement proposals that comply with the law within the time limit set by the supervisory judge.

Reorganization Proceedings

The debtor is deprived of their ability to manage and an administrator is appointed to manage their affairs.
The debtor is obligated to choose their administrator and to hand over their estate, documents concerning their activities, estate, accounts, financial records, and correspondence.
The debtor is obligated to provide explanations concerning their estate and activities to the judge-commissioner and the administrator.

3.2 – Are there circumstances in which directors are obliged to file for insolvency proceedings? If so, when do those circumstances arise?

The debtor is obligated to file for insolvency proceedings within 30 days of becoming insolvent.
Insolvency is presumed when the debtor remains in arrears concerning their financial obligations for 3 months.
Legal persons and organisational units without legal capacity are considered insolvent when their financial obligations exceed the total value of their assets and that situation holds for over 24 months.
It is presumed that the debtor’s monetary obligations exceed the value of their assets if, according to the balance sheet, their liabilities, excluding provisions for liabilities and obligations to related entities, exceed the value of their assets, and this situation persists for a period exceeding twenty-four months.

3.3 – What are the risks facing the directors of an insolvent company?

The directors are liable for any damage that may arise through the failure to file for insolvency proceedings within the time limit set forth above, save where they are not at fault.
The directors provide untrue information in the insolvency petition shall be liable to the penalty of deprivation of liberty from 3 months to 5 years.
The directors provide the court with untrue information about the condition of the debtor’s assets, shall be liable to the same penalty.
The directors do not release to the trustee in insolvency all the assets included in the insolvency estate, account books or other documents concerning the insolvent’s assets shall be liable to the same penalty.
The directors fail to furnish the trustee in insolvency or judge-commissioner with information on the insolvent’s property or fail to provide the trustee in insolvency with the data or documents held thereby shall be liable to the same penalty.

4. Position of creditors

4.1 – What are the main forms of security over movable and immovable property?

The most common types of securities over movable and immovable property are:

mortgage;
pledges and registered pledges over shares, bank accounts or particular assets; and
submission to enforcement.

4.2 – How does the opening of insolvency proceedings affect the rights of secured creditors?

The sums received from the liquidation of the assets which are subjects of secured claims are dedicated to satisfy the creditors whose claims were secured. The claims of the secured creditors are satisfied first when splitting the insolvency fund estate.

4.3 – Where a debt owed to a secured creditor exceeds the value of the security, is the secured creditor entitled to claim for the shortfall?

No, the shortfall is used to satisfy the creditors that are lower in the hierarchy.

4.4 – Which classes of creditor are given preferential status? Are any classes subordinated?

The following is a simplified version of the order in which creditors are satisfied:

1. Secured creditors

● Creditors which established securities over their claims

2. Preferred creditors

● These are determined by statute, they include; employee wages, tax obligations and social security contributions.

3. Unsecured/general creditors

4.5 – Is there a date by which creditors must make claims in the insolvency proceedings? If so, what are the consequences of failing to claim by that date?

The creditors must notify the trustee in insolvency if they wish for their claims to be included in the proceedings. They notifications must be submitted by the date indicated in the insolvency announcement decision (in most cases there is a 30-day deadline). Secured creditors and creditors who’s claims stem from an employment relationship have their claims included in the list of claims ex officio.

4.6 – Are contractual rights of set-off and/or netting effective in insolvency?

Rights to set-offs can be exercised during insolvency proceedings. The fundamental basis for executing a set-off is a declaration by the creditor, submitted no later than during the creditor’s notification to the trustee in insolvency of their intention to participate in the proceedings. Set-off of the insolvent’s claim against the creditor’s claim is permitted if both claims existed on the date of the insolvency declaration, even if the enforceability date of one of them has not yet occurred. Insolvency law facilitates set-off between monetary and non-monetary claims by converting all non-monetary claims to monetary value upon the insolvency declaration. An insolvent debtor can set off against the creditor’s entire claim. However, a creditor can only set off against the debtor’s claims up to the value of their own claim, plus interest accrued before the insolvency declaration date, as interest on insolvency debts ceases to accrue from the declaration date.

Set-off is not allowed if the debtor of the insolvent acquired the claim by transfer or endorsement after the insolvency declaration or acquired it within the last year before the insolvency declaration date, knowing of the existence of grounds for insolvency. Set-off is also not possible if the creditor became a debtor of the insolvent after the date of insolvency.

4.7 – Are contract terms permitting termination of a contract by reason of insolvency (“ipso facto clauses”) effective?

Clauses that automatically terminate the contract solely due to a party’s bankruptcy declaration are null and void.

4.8 – Are retention of title clauses enforceable and (if applicable) what are the main requirements for enforceability?

These clauses are enforceable. In order to enforce it, the creditor (the seller) must apply to the judge overseeing the insolvency to exclude the goods from the insolvency estate. The judge will verify that the stipulation was made in the contract signed by both parties and that it was dated certified.

4.9 – Are foreign creditors treated equally to domestic creditors?

Polish law does not prejudice foreign creditors, they participate in the insolvency proceedings on the same basis as domestic creditors.

5. Setting aside transactions

5.1 – What are the main transaction avoidance provisions applicable to the proceedings referred to above?

Insolvency proceedings:

Gratuitous or undervalued asset disposal: Acts undertaken within one year prior to filing for insolvency, where the debtor disposed of assets either without payment or for a price grossly below their actual value are ineffective towards the insolvency estate.
Premature debt payment and security granting: Granting security or making payments on debts not yet due, by the insolvent within six months before filing the insolvency motion are ineffective towards the insolvency estate. The recipient of such payment or security may petition for these acts to be declared effective if they were unaware of grounds for insolvency at the time of receipt.
Transactions with family members: Remunerated legal acts between the debtor and certain family members, occurring within six months before filing the insolvency motion, unless it is proven that the act does not prejudice creditors may be declared ineffective towards the insolvency estate by the judge-commissioner. This can be initiated ex officio or upon the trustee in insolvency motion.
Excessive Remuneration: If remuneration paid to the insolvent’s representative, managing employee, or management/supervisory service provider is grossly excessive compared to average compensation for similar work and is not justified by actual workload, the judge-commissioner may declare a portion of that remuneration ineffective towards the insolvency estate. This can be initiated ex officio or upon the trustee in insolvency motion.
Unjustified Encumbrances: Any encumbrance (mortgage, pledge, registered pledge, ship mortgage) on the insolvent’s assets is declared ineffective towards the insolvency estate by the judge-commissioner upon the trustee in insolvency motion if the insolvent was not the personal debtor of the secured creditor and this encumbrance was established within a year before the date of filing the insolvency motion, and the insolvent received no consideration for establishing the encumbrance.

Restructuring proceedings (applicable to reorganization proceedings):

Gratuitous or undervalued asset disposal: Legal acts conducted within one year before filing for restructuring proceedings are ineffective towards the restructuring estate if the debtor’s consideration substantially exceeds the consideration received by or reserved for the debtor or a third party.
Unjustified Security Establishment: Establishment of securities on assets one year before filing for restructuring is not effective towards the restructuring estate if it is not connected to the debtor receiving consideration. Securities established within one year before filing for restructuring are also ineffective towards the restructuring estate in part if, on the day of establishment, they exceed by more than half the value of the secured benefit received by the debtor, including ancillary claims specified in the security agreement.

5.2 – Who is entitled to challenge transactions under these provisions?

Contracts containing clauses that hinder or prevent the completion of the goals of the insolvency proceedings are ineffective ex lege. In other cases the trustee in insolvency files a challenge with the judge-commissioner.

The transactions in restructuring proceedings are challenged by the administrator or supervisor, depending on the type of procedure.

6. Cross-border insolvency

6.1 – Do your courts recognize insolvency proceedings commenced in the courts of other jurisdictions?

Yes, proceedings for recognition of insolvency proceedings shall be initiated upon a motion of the foreign administrator, or the debtor if administration of the assets was left in his hands.

6.2 – If so, what assistance can your courts provide, following recognition?

Following recognition, the debtor’s estate located in Poland is immediately secured through the appointment of a temporary court supervisor.
Actions by the foreign insolvency administrator that exceed the scope of normal management of the Polish estate require approval from the Polish court supervisor. This approval may also be necessary for the transport of assets constituting the Polish estate out of Poland.
Enforcement against the insolvent on the basis of foreign enforcement orders enforceable in the country where they were issued in a recognized foreign insolvency proceeding, including on the basis of a list of claims or other similar documents, as well as enforcement on the basis of the provisions of an arrangement concluded in a recognized foreign insolvency proceeding, as well as enforcement on the basis of extracts, copies and other similar documents issued on the basis of an arrangement concluded in a recognized foreign insolvency proceeding, may be carried out after they are declared enforceable by the court recognizing the decision to initiate foreign insolvency proceedings.
Prior to formal recognition of foreign proceedings, the foreign insolvency administrator is entitled to file a request for the securing of the assets located in Poland and apply for the securing evidence relevant to potential proceedings against the debtor in Poland.
After recognition of the foreign bankruptcy proceedings, the foreign insolvency administrator is entitled to file a petition for the declaration of insolvency in Poland and participate in any insolvency proceedings conducted by Polish courts concerning the debtor, operating on the same basis as other creditors.

6.3 – Is it possible to commence insolvency proceedings in relation to a foreign company?

Under Polish law, the jurisdiction of Polish courts to commence insolvency proceedings against a debtor is determined by the location of the debtor’s Centre of Main Interests (COMI) and other connections to Poland.

The principles governing jurisdiction are as follows:

Exclusive Jurisdiction: Polish courts possess exclusive jurisdiction if the debtor’s Centre of Main Interests (COMI) is located within Poland. In such cases, any insolvency proceedings initiated in Poland are classified as main proceedings.
Subsidiary Jurisdiction: Polish courts also have jurisdiction, although not exclusive, if the debtor:

● Conducts business activities in Poland.

● Resides or lives in Poland.

● Possesses estate (assets) in Poland.

● In these instances, any bankruptcy proceedings commenced in Poland are considered subsidiary proceedings.

No Jurisdiction: In all other circumstances, where the debtor’s Centre of Main Interests is outside of Poland and no business activity, residence, or estate exists in Poland, Polish courts lack jurisdiction. Consequently, Polish courts cannot commence insolvency proceedings.

7. Other matters

7.1 – Please consider whether there is any other feature of your country’s insolvency regime of which a lender, investor or purchasers of distressed debts or businesses should be aware? For example, are there any mistakes that foreign creditors often make?

The important feature of Polish insolvency and restructuring regime is the online platform called the National Debtors Register (the “NDR”) introduced on 1 December 2021. The National Debtors Register serves as a platform for bankruptcy and restructuring proceedings. Applications and letters in bankruptcy and restructuring proceedings must be filed exclusively via this platform, including insolvency and restructuring petitions or claims submissions. Voting on the arrangement and collecting creditors’ votes also take place via this platform. The same applies to court decisions, which are delivered in the NDR system.

7.2 – Are there any other stakeholders or entities (eg governmental or regulatory) which may influence the outcome of any restructuring?

No.

7.3 – Are there currently any proposals for significant reform of your insolvency laws?

On 18 October 2024, the Ministry of Justice drafted a proposal of the amendment to the Restructuring Law and the Bankruptcy Law (implementing a directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019). The amendment proposals include, among others:

obligation to include in the restructuring plan information on the impact of restructuring on employment and on consultations with employee representatives;
introducing a mandatory satisfaction test to help assess the economic viability of restructuring (verifying what level of satisfaction would occur in a potential bankruptcy proceeding);
possibility of the arrangement to be accepted even if the required majority is not obtained, if the privileged creditor groups voting against the arrangement receive full repayment of their debts under the arrangement;
obligation of in rem creditors to participate in the arrangement.

Contacts

Maciej Jóźwiak Partner

E: maciej.jozwiak@eversheds-sutherland.pl T: +48 22 50 50 747

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Paweł Adamczyk Senior Associate

E: pawel.adamczyk@eversheds-sutherland.pl T: +48 22 50 50 113

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