Second Chance for Second Chance Directive?

In 2019, the EU adopted the so-called Second Chance Directive on restructuring and insolvency. Member states were obliged to adopt and publish by 2021, but at Poland’s request, the deadline was extended by one year.

Two years later, Poland is yet to implement the directive, although a number of its measures have already been partially implemented. As the participants of the recent INSOL Restructuring and Insolvency Law Congress pointed out, Polish bankruptcy and restructuring law requires significant reform, and the implementation of the Second Chance Directive is one of the most pressing matters.

Its implementation is primarily aimed at enabling effective restructuring at an early stage of a company’s financial troubles, thereby avoiding insolvency. The implementation aims to:

• Introduce preventative restructuring frameworks for entrepreneurs at risk of insolvency, allowing them to continue their businesses;

• Introduce interim protection from bailiff enforcement for entrepreneurs undertaking preventive restructuring;

• Provide a cross-class, cram-down mechanism whereby a plan is imposed on dissenting creditors both within a class and across classes, as are other tools for streamlining the restructuring process – such as adequate control of economic rationale for conducting restructuring proceedings;

• Provide for solutions that allow a challenge to restructuring plans with a best-interest-of-creditors test;

• Increase the influence of creditors on the selection of an insolvency administrator; and

• Clarify the rules for the selection of persons appointed to act as extrajudicial bodies of bankruptcy and restructuring proceedings, including providing a publicly-available list of restructuring advisors.

Experts generally support these regulations, with INSOL 2023 participants pointing out that the implementation of the directive is in Poland’s best interest and should be a bipartisan effort.