The preventive concordat (or, simply, the concordat) is an agreement concluded between the Debtor and its creditors which hold at least two thirds of the accepted and undisputed receivables against the Debtor, by which these creditors and the Debtor agree on a plan to restructure the Debtor’s business and to re-pay its debts.
The creditors may find this a useful instrument to restructure the Debtor’s business and also gives them prior warning that insolvency proceedings may be pending. It equips them with all the relevant information and means to support a safe restructuring of the Debtor’s activity.
The concordat (especially if acknowledged – ro. ”omologat”) may be a very useful tool, since it would protect the Debtor against enforcement or insolvency claims from its creditors.
The concordat procedure enables the Debtor to reach an agreement with its creditors, and offers the possibility of preventing minority dissenting creditors from having undue influence to block a solution to the Debtor's financial problems being agreed upon.
A Debtor wishing to benefit from a concordat will ask the court to appoint ABRAXAS to assume the role of “conciliator”. Within 30 days of the appointment of ABRAXAS as conciliator, we prepare the concordat offer consisting of a draft concordat agreement and a restructuring plan.
The draft concordat agreement refers at least to:
- the status of the Debtor’s balance sheet;
- a description of the causes of the Debtor’s financial difficulties and any remedial actions which have already been taken;
- the projected financial results of the Debtor for the following six months.
The restructuring plan make reference to the following topics:
- measures which will be taken to change the way in which the Debtor conducts its business (including changes to its management and operational and employment structures);
- the means by which the Debtor intends to resolve its difficulties (including any proposed share capital increases, bank loans, issuance of bonds or asset disposals);
- the percentage by which the receivables of the creditors will be covered by implementing the concordat (which must amount to at least 50%); and
- the term within which the debts set out in the concordat must be re-paid, which must not exceed 18 months from the date on which the concordat is signed (this term may be extended by the creditors for no more than six months).
The restructuring plan may provide for debt rescheduling, the partial or total release of debt, set-offs or other such measures. For fiscal debts, the approval of the tax authorities must be obtained and state aid rules must be complied with.
Mutatis mutandis, our prerogatives as conciliator are very similar to the prerogatives of a judicial administrator in insolvency proceedings.