Phases of the reorganisation proceedings
The reorganisation proceedings begin when you submit the application concerning corporate reorganisation to the court. The court decides on starting the reorganisation and appoints an administrator. The administrator draws up a preliminary report on your company and a proposal for the reorganisation programme. The creditors must approve the proposal, the court must confirm it and your company must comply with it for the duration of the reorganisation process.
Before preparing the actual application concerning corporate reorganisation, you may want to order a report on your company’s financial situation from an outside expert. With the help of the report, your company can make a good start towards recovery. Furthermore, as an entrepreneur, you will receive advice and support for solving your company’s problems.
A TMA analysis can be used as the basis for the report. The analysis focuses on the most important areas requiring development in your company. Such areas may be your company’s profitability, unpaid payments or future prospects.
You can append the report to your corporate reorganisation application. You can also go through the report with your company's key stakeholders, such as its creditors and providers of funding. The report may make it easier for your company to get to corporate reorganisation.
Usually the company ordering the report also pays for it. The creditors may also share the costs.
Ask an expert to prepare a free-form corporate reorganisation application and deliver it to the court. The following documents must be appended to the application
- extract from the trade register
- copy of the articles of association or the partnership agreement
- details of the company's ownership arrangements
- copies of the financial statements for the past two financial years and possibly also the interim financial statements
- report stating the actual sector in which your company operates, number and location of its operating points and employees, its turnover, as well as its assets and debts
- list of creditors
- list of substantial assets
- auditor's report
- an information of whether a bankruptcy petition has been filed for your company
- other necessary information, such as the details of your company's financial situation.
If your company submits the reorganisation application without the creditors’ support, the following information must also be given:
- the main reasons for the company's financial difficulties
- how the company is planning to continue its operations
- how the company is planning to cover the costs resulting from the reorganisation
- how the company is planning to pay the debts accumulating during the reorganisation proceedings.
If there are no obstacles to the corporate reorganisation, the court makes a decision on the start of the reorganisation proceedings.
After the decision has been made, your company may not pay its debts that have accumulated before the reorganisation and the creditors may not collect them from your company. Moreover, your company may not convert the collateral for its debts into cash without the permission of the court. The purpose is to protect your company and ensure that the reorganisation debts are paid on an equal basis.
Furthermore, no administrative sanctions may be imposed on your company. For example, you company cannot be removed from the prepayment register or its transport or alcohol serving licences cannot be cancelled.
In other words, you can continue your business operations. You must deliver the goods to your customers and meet your other contractual obligations. You must pay the wages and salaries of your employees and all the invoices and debts that are generated during the reorganisation proceedings.
The court also appoints an administrator for your company to supervise the reorganisation proceedings and manage the practical aspects of the process. The court may also appoint a creditors’ committee to assist it during the proceedings.
The court-appointed administrator prepares a preliminary report on the assets, debts and other liabilities of your company. In the report, the administrator also presents matters impacting the financial situation of your company and estimates its growth prospects.
Based on the report, the administrator prepares a proposal for a reorganisation programme in cooperation with your company and its creditors. If necessary, outside experts can also take part in the work. The proposal contains the concrete and detailed measures aimed at rehabilitating your company and arranging its debts.
The aim of the reorganisation programme is to achieve the end result that can best meet the creditors’ demands. However, the programme should also be realistic and feasible. In addition, a good reorganisation programme motivates your company to achieve the objectives, even if it seems difficult.
Your company must submit the proposal for the reorganisation programme to its creditors and the court.
If all the creditors accept the proposal and its meets the requirements laid down in the law, the court can approve the programme. The court can also approve the programme if a majority of the creditors or a specific minimum number is in favour of it.
On average, it takes nine months from the start of the reorganisation proceedings to the approval of the programme.
After the approval of the reorganisation programme, the prohibitions applying to paying, debt collection and implementation are no longer in effect. The reorganisation programme will replace the terms and conditions of the debts generated before the reorganisation proceedings. Your company bears the primary responsibility for complying with the reorganisation programme. However, the court may appoint a supervisor to monitor your company’s operation during the reorganisation programme.
A corporate reorganisation process usually lasts between five and ten years.