4 Essential Questions You Have to Ask Yourself When You Sign an Agreement With a Company in Judicial Reorganization

1. How can I increase my chances of cashing the price of the agreement?
2. Can a company in judicial reorganization issue promissory notes?
3. Can we force execute a company in judicial reorganization?
4. Who is the person who has the legal capacity to negotiate and sign the agreement on behalf of the company in judicial reorganization?

1. How can I increase my chances of cashing the price of the agreement?
You wish to sign a commercial agreement with a company in judicial reorganization (the procedure which applies to the debtor in order to pay his debts, according to the reorganization plan in the insolvency procedure)?
Taking into account the general trend of not recovering the debts because of the tough economical situation we find ourselves in, taking additional guarantees is a must for debt collection. The additional guarantees are even more necessary in this case, when your future business partner is in insolvency, so the company already has financial problems.

Among the safest guarantees in this case, and at the same time easy to implement, are:

endorsement of the promissory note (when another natural or legal person guarantees with his own assets by cosigning the promissory note), so that, if the debt collection isn’t possible directly from your debtor you can go against the guarantor. Still, beware who the guarantor is. You will have to do a preliminary check of the future guarantor to insure that the guarantor is solvable so that you can start the debt collection procedures against him;
the assignment agreement. Through this agreement, the company in judicial reorganization can assign to you, for free or for a price, a present or future debt, which this company has to receive from another. Also, in this situation you have to make sure that the assigned debtor (the debtor of the company in judicial reorganization) is solvable and that the respective debt is big enough to cover yours. The provisions you will insert in the agreement are vital and you have to pay them a lot of attention in order to prevent various problems which arise in practice;
the gira of the promissory note. If the company in judicial reorganization is the beneficiary of promissory notes issued by a solvent company, these promissory notes can be assigned to you (by including your name on the promissory note in the proper heading), so that you can recover the debt directly from the issuer of the promissory note.

2. Can a company in judicial reorganization issue promissory notes?
Yes, this company can issue promissory notes but you have to make sure that these are endorsed by a solvable person in order to insure your debt collection.

3. Can we force execute a company in judicial reorganization?
The insolvency law (85/2006) specifies that: “Since the procedure is opened all judicial actions, extrajudicial or measures of forced execution for debt collection against the debtor or his belongings are rightfully suspended”.
As a consequence, we can’t force execute a company in judicial reorganization because the law doesn’t distinguish between the debts borne before the date the procedure was opened and the ones borne after.

4. Who is the person who has the legal capacity to negotiate and sign the agreement on behalf of the company in judicial reorganization?
The administrator appointed in the incorporation agreement still has the right to administrate the company or he is deprived of this right?

Because the company is in reorganization, there are the following options: the administrator appointed in the incorporation agreement, the special administrator or the judicial administrator.

There is the possibility that the administrator appointed in the incorporation agreement has no longer the right to administrate the company and you will have to sign the agreement with the judicial administrator (the one appointed by the judge in the insolvency procedure or by the general assembly of the creditors) so that the agreement will be valid.
In some cases, the general assembly of the company which enters the insolvency procedure appoints a special person to represent the company’s interests and the ones of the shareholders. After confirming the reorganization plan, the special administrator will also have the capacity to administrate the activity of the company, under the supervision of the judicial administrator, so that the agreement will have to be signed by both of them.
Just to make sure, it is better that the judicial administrator confirms all the documents you sign with the other administrators, by signing them as well.

Be careful! The specification “in reorganizare judiciara, in judicial reorganisation, en redressement” will have to be inserted in the agreement.


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