Entrepreneurs may be able to avoid bankruptcy by anticipating difficulties - if they keep a close eye on the financial situation of their business.
Bankruptcy is regulated by the New Bankruptcy Code.
It provides a simplified up-to-date, fair and functional system of regulations based on the second chance notion, which can be summarised as follows:
- giving priority to rescuing the business;
- giving business a second chance;
- treating the bona fide party (the innocent party as opposed to the fraudulent one) with more leniency than has been the case to date;
- adoption of faster bankruptcy proceedings in the event that the company's reconstruction efforts are unsuccessful;
- greater transparency;
- introduction of a conciliation procedure;
- special treatment of small bankruptcies.
According to the Bankruptcy Code, a debtor unable to pay their overdue financial obligations must be declared bankrupt. Bankruptcy conditions are as follows:
- The commercial status of the debtor (natural or legal person). An exception to this are legal persons pursuing economic purposes, even if they have no commercial status, and which may go bankrupt.
- The cessation of payments by the debtor, as defined by law as the failure to pay overdue financial obligations, in a general and permanent way. Bankruptcy may be declared on the basis of mere "threatened" failure to perform, when requested by the debtor himself.
The following entities may request that bankruptcy be declared:
- creditor with a legal interest;
- the District Attorney, in the case that this is justified by public interest;
- the debtor himself, who is obliged to request bankruptcy, if he has already entered a state of insolvency.
The bankruptcy court will declare the debtor bankrupt if it finds that the above conditions apply, otherwise it will reject the request.
The court responsible for declaring bankruptcy is the Multi-member Court of First Instance, in which district the debtor's main interests lie (in other words where the trader's main business is based)
Entrepreneurs having experienced bankruptcy should not lose confidence in their ability to embark on a new business.
Bankruptcy procedure: a step-by-step guide
Bankruptcy is declared following a petition from either:
- creditor with a legal interest;
- prosecuting attorney (provided that this is justified by reasons of public interest).
The debtor must submit a petition for bankruptcy judgement to the Court hearing the bankruptcy, within fifteen days. The application shall include an original promissory note to meet the initial costs relating to the bankruptcy. The Court may reject the petition if certain conditions detailed in the Code are present.
If bankruptcy is declared, the Court appoints a Judge-Rapporteur and a trustee in bankruptcy, orders the sealing of the bankruptcy assets, and sets a date for payment suspension.
In the event of bankruptcy of general or limited partnerships, the general partners are declared bankrupt by the same decision.
Bankruptcy of a civil or other association with a legal personality does not necessarily lead to bankruptcy of its members. In addition, the Code covers the publication (e.g. bankruptcy register at each Court of First Instance) and listing in the land registry or cadastre.
The Court appoints a Judge-Rapporter and trustee in bankruptcy and orders the sealing of the bankruptcy assets. It sets a day, time and place for the creditors to appear before the rapporteur to draw up a list of alleged creditors, elect a creditors committee, establish a procedure for publication, and set a date for the meeting of creditors.
Rescuing the company, its exploitation, the distribution of the bankruptcy estate, and the liability of the debtor following the bankruptcy proceedings can be regulated through a restructuring plan.
This may be submitted by the debtor or trustee.
- The debtor is entitled to submit a restructuring plan along with the application submitted to declare bankruptcy, or within four (4) months after the declared bankruptcy. This deadline may be extended by the court once, for a short period of up to three months.
- The trustee is only entitled to submit a reorganisation plan after the deadline to submit a plan by the debtor has passed, within three months after this deadline, and following a relevant report.
The court shall proceed to the pre-evaluation of the plan within twenty (20) days of its submission.
When the plan is not rejected, the court shall through its decision immediately determine a deadline not exceeding three (3) months to be accepted or rejected by creditors, and will set a date for a meeting of creditors to be held to discuss and vote on the plan.
Greek Chambers provide basic information to companies, through their legal services.