RESTRUCTURING vs INSOLVENCY

Romanian companies between the challenges of the market and survival solutions.

The Romanian economy is confronted with major challenges stemming from internal as well as external factors: legislative instability, workforce shortage, inflation, lack of competitivity and growing gaps between companies due to uneven access to innovation and technological development resources.

In this context, many Romanian companies experience a growing financial pressure forcing them to reassess their operating mode and are even faced with an extreme choice: restructuring or insolvency.

Restructuring can take the form of a restructuring agreement or a company voluntary arrangement. These solutions come with a chance for recovery for companies that are not insolvent but require a substantial financial and management effort, via the reorganization of debts and optimization of operations.

The reorganization, involving the company’s going into insolvency, is a more radical solution requiring significant compromise such as the loss of control over the company, damaging the reputation of the company and sometimes even bankruptcy. Nevertheless, unfortunately, it remains the most used option.

Here follows a comprehensive overview of the key elements of these procedures, as provided under the Law no. 85/2014 on insolvency and prevention of insolvency.