A number of changes have been introduced to ‘SIREVE’ (Extrajudicial Business Recovery System) and to the Code of Insolvency and Corporate Recovery (concerning PER, the Special Revitalisation Process) following the publication of the Decree-Law 26/2015 of February 6.
The changes aim to create a more favourable environment for companies when it comes to approving recovery plans, obtaining long-term funding and attracting new investors.
What has changed regarding SIREVE?
1. Legitimacy: Only commercial companies and individual entrepreneurs with organised accounts may access SIREVE. Companies facing insolvency cannot benefit from this procedure. Companies that in the two years preceding the beginning of the procedure have failed to fulfil the terms of their recovery plan approved under PER are also prevented from using SIREVE.
2. Diagnosis of the Economic and Financial Situation: Before the beginning of the procedure, companies interested in SIREVE are required to perform a diagnosis of their economic and financial situation by using a software platform made available for free by IAPMEI. Only companies that meet the established minimum criteria are legally entitled to begin the procedure.
3. Recovery Plan: For the purposes of the agreement between the company and its creditors, the following is now established: (i) the recovery plan voted by creditors whose claims represent at least 1/3 of the total debt of the company must receive more than 2/3 of all the positive votes issued and more than half of the votes issued corresponding to non-subordinated credits, excluding abstentions, or (ii) the recovery plan must receive the favourable vote of creditors whose claims represent more than half of the company’s debts, as long as more than half of those votes correspond to non-subordinated credits, excluding abstentions.
4. Effects of the Procedure in Lawsuits: In respect to guaranteed operations, the guarantors of the debtor also benefit from the effects of the acceptance of the use of SIREVE relating to (a) preventing the beginning of any executive actions for the payment of a certain amount, or other actions aimed at enforcing compliance of financial obligations while the procedure is not extinct and (b) suspension, automatic and for the same period, of executive actions for the payment of a certain amount, or any other actions aimed at enforcing compliance of financial obligations, which are pending to date.
5. Privilege and Warranties Maintenance: Creditors who finance the activity of the debtor during the procedure now benefit from a privilege, which is graduated before those granted to workers. The guarantees agreed between the debtor and its creditors during the process, with the purpose of providing the financial resources for the development of its activity, must be maintained for a period of two years, even if the company is declared insolvent after the process or a new restructuring process is initiated.
6. Effects of the Agreement in Lawsuits: The effects of the agreement approved under SIREVE over the executions and pending actions also extend to guarantors and their guaranteed operations. However, these effects only occur with regard to creditors who have signed the agreement approved under SIREVE.
7. Termination of the Procedure and new sireve Application: The company may give up the procedure initiated under SIREVE. However, in this case, the company can not apply to SIREVE again for a period of two years.
8. Confidentiality: The procedure is confidential, as well as the information provided by companies in the IAPMEI platform.
And what about the Code of Insolvency and Corporate Recovery?
The majority votes required for the adoption of recovery plans under PER were also clarified. Thus, the recovery plan is considered approved when (i) it is voted by creditors whose claims represent at least 1/3 of the total claims related to voting rights included in the list of credits referred to in paragraphs 3 and 4 of Article 17d; it collects the favourable vote of more than 2/3 of all votes issued and more than half of the votes corresponding to non-subordinated credits, excluding abstentions, or (ii) there is a favourable vote of creditors whose claims represent more than half of all claims relating to the right to vote, in accordance with the provisions of the preceding paragraph and more than half of votes corresponding to non-subordinated credits, excluding abstentions.
By Dr Eduardo Serra Jorge
|| features@algarveresident.com
Dr Eduardo Serra Jorge is founding member, senior partner and CEO of lawyers firm Eduardo Serra Jorge & Maria José Garcia – Sociedade de Advogados, R.L., created in 1987.
In his column, he addresses legal issues affecting foreign residents in Portugal.
Faro office at Gaveto das Ruas Pedro Nunes e José de Matos, 5 R/C
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