UNPIR: Romania, the second country in the world with an Insolvency Code

The Ministry of Justice and the World Bank are preparing a draft for the creation of an Insolvency Code. Romania will be the second country in the world, after the US, to have such a code, said Arin Stănescu, the president of the National Union of the Romanian Insolvency Practitioners (UNPIR). The document will compile and clarify all the laws in the insolvency sector.

He said: "The Ministry and the World Bank will announce, in mid-June, the shortlist of those selected in the auction for the drafting of the Insolvency Code. The Code will include all the current legislation, which it will clarify and improve upon. The winners of the auction will also go through a special training program".

Right now, the members of the Parliament are also reviewing and debating new amendments to the Law of Insolvency, in order to improve its practical applications. Furthermore, the National Bank, has put up for debate a draft by which banks would be allowed to take control of debtor companies, for a maximum of three years, which may be extended to a maximum of four years, if valid reasons are provided. This project specifies the conditions under which lenders can get involved in the administration of debtor entities, outside the financial sector, institutions, by holding their control. Arin Stănescu supports this project of the NBR, since he considers that the banks" involvement as shareholders would increase the chances of many companies to exit insolvency.

The president of the UNPIR also said that the number of new insolvency proceedings will not change by much in 2011, compared to 2010: "The overall trend is downward, but it will only become clear which way the economy and companies are heading in the second half of 2011. For the most part, the new insolvency cases of Q1 2011 were submitted in 2010".

Last autumn, the law of insolvency was amended so as to allow investors or banks that opted to inject additional money into distressed companies to fully recoup their investments and even turn out a good besides. This allows the companies in question to be reintegrated in the economic circuit. The amendments to the legislation have also reduced the delays between hearings and the duration of the insolvency proceedings.