Concordat (Konkordato): Essence, Stages, and Advantages

A concordat is a legal process that allows debtors who are unable to repay their debts on time or are at risk of insolvency to negotiate with creditors for debt repayment according to a specific plan. Its purpose is to improve the debtor's financial situation and prevent bankruptcy.

The Concordat Process
The procedure is governed by the Enforcement and Bankruptcy Law No. 2004 and includes the following stages:

1. Application for Concordat

• The application can be submitted by the debtor or one of the creditors to the commercial court of first instance.
• The application must be accompanied by documents confirming the debtor's financial condition, as well as a preliminary concordat plan.
• The court may decide to grant a temporary moratorium (for 3 months with the possibility of extending it to 5 months).

2. Temporary Moratorium and Appointment of a Trustee

• The court appoints one or more trustees to oversee the process.
• The debtor cannot take new loans without the court's permission but may continue their activities.
• Creditors cannot initiate enforcement proceedings against the debtor or continue already initiated collections.

3. Final Moratorium

• If, during the temporary moratorium period, the court concludes that the concordat can be successful, it grants a final moratorium for 1 year (with a possibility of extension for 6 months).
• During this period, the debtor continues their activities according to the concordat plan.

4. Approval by Creditors and Court Confirmation

• For the concordat to be accepted, it must be approved by at least half of the creditors representing at least two-thirds of the total debt amount.
• The plan approved by the creditors is submitted to the court, and if it receives court approval, it becomes binding.

5. Failure of the Concordat and Bankruptcy

• If the concordat plan is not fulfilled or is not approved by the court, a decision may be made regarding the debtor's bankruptcy.
  
  

Possible Actions for Creditors
To protect their rights during the concordat process, creditors are advised to take the following steps:

• Interacting with the Trustee:
  Monitor the repayment plan proposed by the debtor and report any suspicious circumstances to the trustee if necessary.
• Participating in Creditors' Meetings:
  It is important to participate in the vote on the repayment plan to protect one's interests.
• Analyzing the Debtor's Assets:
  If there is suspicion of asset concealment or fraud, legal protection can be sought.
• Filing Objections in Court:
  If the concordat plan contradicts the principles of good faith, objections can be filed in court to seek its rejection.
• Initiating Bankruptcy Proceedings:
  If the concordat fails, creditors may file a lawsuit in court to have the debtor declared bankrupt.

Since the concordat is a complex legal process, creditors are advised to seek support from attorneys specializing in this area.